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The Market Has Memory: Event Areas and Key Levels

The forex market possesses a strong memory, especially evident in the levels of support and resistance that are frequently tested. Understanding the concept of "event areas" can assist traders in anticipating price movements and making more precise trading decisions.

  1. 1. The Market Always Remembers:

  • Levels of support and resistance demonstrate that the market has memory. Price corrections and returns to specific areas are evidence of the market's memory of significant movements.
  1. 2. High Probability:

  • While forex trading involves probabilities, understanding that the market "remembers" key levels can increase the probability of success in trading. This is evident from price action formations and trading signals that occur.
  1. 3. Forex Trading is Not Absolute:

  • Forex trading is not about absolute certainty but rather about probability. Being aware that the market has memory opens opportunities to make reliable assumptions.
  1. 4. Price Action Formations:

  • Price action, such as pin bars or rejection candlesticks, often provide signals of price movement direction. The combination of market assumptions and price action formations can provide trading signals with high probability.
  1. 5. Event Area in DAX30 Example:

  • An example on the DAX30 chart shows key resistance levels and event areas. A pin bar reversal at the event area provided a sell signal followed by a price decline. This occurrence repeats, indicating that the market remembers these levels.
  1. 6. Event Area in EUR/USD Example:

  • In the EUR/USD example, a pin bar reversal formed an event area remembered by the market. Whenever the price approaches this area, there is a significant reaction. Understanding the "event area" aids in making trading decisions.
  1. 7. Event Area and Support/Resistance Levels:

  • Using event areas as the "market's memory" can be preceded by price action formations or occur without them. Levels of support and resistance that have been tested repeatedly tend to be remembered by the market.
  1. 8. Example of Event Area in XAU/USD:

  • On the XAU/USD chart, the level of 1277 is key, and an event area forms after the price breaks through the resistance level. Whenever the price approaches this level, the market reacts strongly. Rejection pin bars and subsequent price movements demonstrate the strong market memory.
  1. 9. Support and Resistance Levels:

  • The market does not forget support and resistance levels, especially those that have been tested repeatedly. Whenever the price approaches these levels, the market gives a significant reaction.

Understanding that the market has a strong memory of support and resistance levels, as well as event areas, provides an advantage to traders. Analysis of price action and awareness of key levels aid in making better trading decisions. By observing price movements around these levels, traders can increase the probability of success in forex trading.

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