What do I need to run this procedure?
- The steady upward trend,
- maximum levels over an extended period of time or historically high
- decrease in volatility
- volume reduction
Spontaneously.
How to recognize?
A sharp surge in volumes, retest haev, increased volatility.
That acts trigger?
Nothing. But formally absolutely any, far-fetched event or news. Yes, even a tsekotuha fly, sitting on the nose of a trader, who sneezed, smashed the monitor with his head, hit the keyboard out of anger and accidentally activated a large sell order. But usually all this is organized by market makers., who perfectly see in real time the shift in the balance of power towards the bulls. And as you know, the strong side always loses in the market..
But the mechanism itself is interesting.
As I said above, – an important factor is the decrease in volatility. Traders adapt to the new reality with 0.2% the change in the price of the underlying asset per day and the longer the market sluggishness, the stronger the adaptation, as a psychological, так и механическая (robots, торговые системы).
Here, allowable, stable and long-term trend. Everything, who played the falls are long ago knocked out of the saddle and demoralized, all bulls are accustomed to the strength and stability of the market.
so, begins.
-0.5%. They, who are in shorts use the moment and close the position, because. fear, that there will never be such a strong correction. They, who is bullish, either waiting, or is loaded with "cheap assets". Volumes are still insignificant.
-1%. Considering, that such a strong movement has not been for many days, then the market leaves about 90% intraday athletes, because. during this time they have exhausted their limit of trust in a collapse and consider, that this is the maximum that the market is capable of, usually followed by a rebound. Optimists are likely to average out, considering it a good opportunity
-2% Usually, begins to endure intraday people, who trade with large leverage within the day. Robots for sale are activated, because 2% decline means out of range for several days. They, who stand in the long are getting nervous, but still hold positions. Some keep on average.
-3% Так называемая, vacuum zone. Ie. shorts by loyah psychologically scary, because. such a strong fall was not many weeks and when people fought for many months from the short, then there are not many who want to immediately and so quickly repeat their sad experience. The fall is amplified by those, who stood in the long. Those levels are already twitching, who stocked up on the most hays. Either does not stand the score, either nerves. Most algorithmic systems are likely to merge longs at such prices.
-5% And now it rushed. Let's go to the exit, who averaged at -1% and those finally surrender, who bought at the very highs. Messy sales start.
-6% Episode of massive promiscuous sales intensifies. Ie. there is a cascade of those, who acted as buyers at higher levels, ie. when corrected for 2-3-5% etc. Knocks out at such levels 90% плечевиков, because. even 5 shoulder at 6% – it's already -30% from the deposit, and many go to everything, especially with reduced volatility. Kind low volatility is a guarantee of large leverage and this is what triggers such a strong fall. I hope it is clear, why big shoulders? When the index changes per day by 0.2%, then in order to somehow justify participation in trade and show profit, people raise their shoulders to 10 and higher.
-7% Long players are completely demoralized. They, who actively bought out corrections, caught knives and averaged, then surrender and leave the battlefield, because. no nerves can stand, no account. They, who were filled to the maximum in the majority are forced to merge to meet margin requirements. Robots in 95% either come out, or turn into short. After such a sharp and rapid price change, there are quite a few players, who keep taking a hit.
Why such falls are very rare on loys? A few reasons.
1. No overhang of longs, ie. no fuel and driver to fall.
2. Robots adapt to high volatility, traders are also psychologically prepared for strong price fluctuations. 3-5% don't surprise anyone a day. Remember August-October? The indices went along 5-7% per day from maximum to minimum and it did not surprise anyone, and now some pitiful FLOOR percent (!!) already a whole event ))) Ie. adaptation of trading systems and psychological compatibility, the habit of new market behavior kind of protects the system from flash crash.
Therefore, such sharp and rapid falls always happen from highs and when volatility falls.. There is nothing more terrible and dangerous in trading., чем устойчивый тренд и BARELY стремящиеся к нулю – это как пороховая бочка. Rises suddenly, but strong.
Usually, after such falls, the next day there is a squeezing of those, who tried to average and counted on a bounce. After a few days, the rebound still occurs, but on 30-60% on the value of the fall, after which the continuation of the fall, but at a significantly slower pace and usually below the levels of the first fall.
Истории о том, that gold and silver collapsed because of Ben's statements - complete and unconditional nonsense. It collapsed because, that the overhang of long positions has become excessive.
It all means, what about the oil, the stock markets will be the same, as silver yesterday. Just a little later. Of course, this will happen in the absence of any objective signals, absolutely out of the blue. And then ... well, then the analysts after the fact, certainly, will tell you what caused the fall, and again this will not have the slightest relation to reality )))
Example with gold – this is a call to you. I am very afraid of strong uptrends, because. at any moment can be hauled up on 10% in the absence of a reason.
