GBP Collapses - The Power Of Order Flow & The M Pattern

Hey traders,

Remember that the market is a mechanism that transfer wealth from the patient to the impatient.

If you wish to stay on the side on the patient practioners, few things beat letting the price behavior and the swings that form in the process dictate your entries.

The OFA script applied to the chart of GBPUSD speaks a thousands words.

While there are a number of setups that it identifies, with the circles and diamond triggers, today I want to touch on a recurring pattern that when taken under the right context becomes a great application of the OFA properties.

So, lets talk about the M pattern in the pound.. check the video to find out all the insights...

Remember the two key main features of the OFA indicator:

Magnitude: A major clue that will help determine the health of a trend is the type of progress by the dominant side in control of the trend. We need to ask the following question: Are the new legs in the active buy-sell side campaign as identified by the script increasing or decreasing in magnitude?

Velocity: When it comes to the distance the price moves, the magnitude is only ½ the equation. The other ½ has to do with the velocity of the move or the speed. Was the new leg created after a fast and impulsive move? Or did price make a new low or high with the movement being sluggish, compressive and taking too long to form? A good rule of thumb is to count the number of candles it took to achieve a new leg.