Tao Te Ching says: Dao begets one, one begets two, two begets three, three begets all things. The number 3 is a very magical number, let's explore the application of "number 3" in trading.
When a key support or resistance level is tested for the 3rd time, there is often a breakout or a failed test. This seems to be a nonsense, the focus is not on the result, but on the third test. see picture 1):
figure 1)
The first and second tests establish a key resistance level of a horizontal line or trend line. When the third test is performed, it is the time for us to take action to participate in the transaction. As for whether to make a breakthrough or make a callback, it depends on the actual market trend Comprehensive judgment.
Next, let's look at a few cases of "things but 3":
figure 2)
image 3)
Figure 4)
Through the above three cases, we can't help but ask: Why is it not the first or second time, but the third time is the right time to participate in the transaction?
The first and second times are to establish the key support or resistance level of the price, so it is not the time to participate in the transaction. The third time is on the premise of establishing the key level. After the price is tested for the first and second times, one side's power will be weakened, and the other's power will increase, so it is often easy to change the market after the third time.
There are also 4th and 5th or even more tests, why not the 4th and 5th?
Here is a question of freshness. In supply and demand trading, when a supply and demand zone is established, the more times the market outlook tests, the lower the freshness of the supply and demand zone will be, and the lower the effective support and resistance level will be. After the supply and demand zone is established, the number of market outlook price tests is best not to exceed 2 times, otherwise the supply and demand zone is likely to fail. See picture (5):
Figure 5)
It can be seen that after a key support and resistance level is established, the third test is generally the best time window to do it. The fourth test can still be considered, and the subsequent tests should be cautiously involved.
Finally, add a note, the 1st, 2nd and 3rd time, they must be the same trend level or structural trend.
disclaimer
The analysis and opinions of all articles in this official account do not constitute any investment or trading advice, but are only shared, communicated, recorded, and retained by the author himself. If readers make investment decisions after reading this article, they are all personal independent thinking behaviors and have nothing to do with this official account. Trading should not be the whole of your investment, nor should it be the whole of your life. The market has risks, so you need to be cautious when investing!
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