Lesson #4 - Coral - Resistance
Coral levels are a key component within the context of the so-called FlowZone – areas of changing liquidity that play a significant role in the flow of large capitals in the forex market. These levels act as resistances and are closer to the current price than Plum and MediumOrchid levels. Price interactions with Coral levels are more frequent, and these levels are often breached. When the price breaches the Coral level, it typically returns to it, though this may take several hours to several days. This level is published in 5-minute cycles. The level acts as resistance in areas where it appears as a "solid line," but historical data shows that its optimal effectiveness is until 11:00 AM GMT.
Characteristics of Coral
Coral levels, as part of the DML levels for the EURCAD currency pair, are characterized by a high frequency of interactions with the price. When the price approaches these levels, it often results in a significant rebound, highlighting the importance of these levels as strong points of resistance. In situations where the price breaches the Coral level, there is a high probability of returning to this level, though the waiting time may vary. Such behavior emphasizes the critical role of these levels in predicting future price movements.
Models for Trading Coral
There are two main strategies for utilizing Coral levels in trading:
Reaction to the Level: This strategy involves observing the price as it approaches the Coral level and reacting to its rebound. Traders expect the price to bounce off the Coral level, creating an opportunity to enter a trade in the direction of the rebound. This strategy is particularly effective in short-term time frames where precise price reactions are crucial.
Return to the Level after Breach: In cases where the price crosses the Coral level, this strategy assumes that the price will return to this level with high probability. This strategy is useful in long-term analyses where predicting the return to key resistance levels can significantly improve risk and capital management.
Additional Tips
Coral levels also provide valuable insights in the context of trend analysis. They are particularly useful during the Asian and European sessions. If the market trend is downward – determined, for example, according to the MMD methodology (which will be discussed in subsequent lessons) – and the price approaches the Coral level, it presents an excellent opportunity to open a SELL position in line with the main trend. Additionally, the presence of other DML levels below Coral may indicate the possibility of a deeper correction, making the strategy more comprehensive and flexible in the face of changing market conditions.
Summary
Coral levels, as an integral part of models related to DML levels for the EURCAD currency pair, offer unique opportunities for identifying key points of resistance and managing risk. Their use in trading practice, both in short-term and long-term strategies, can significantly enhance investment efficiency, providing precise tools for analyzing and predicting market movements.
Examples of Price Reaction to Coral Levels on EURCAD
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MediumOrchid
MediumOrchid levels are another crucial element within the context of the so-called FlowZone – areas of liquidity changes that play a significant role in the flows of large capitals in the forex market. These levels act as resistances, being closer to the current price compared to Plum levels, making them more frequently reached and equally significant in the price movement analysis for the EURCAD currency pair. This level is published in 5-minute cycles. The level acts as resistance in areas where it appears as a "solid line," but historical data shows that its optimal effectiveness is until 11:00 AM GMT.
Khaki
Khaki levels are among the closest resistance levels relative to the current price, making them frequently reached and breached. These levels are characterized by a high repeatability of returns to the levels after being breached. They are particularly useful during the Asian session and the beginning of the European session.
When left unresolved for a longer period, they become crucial points of reference for future market movements, initiating new swings, corrections, or waves upon resolution. This level is published in 5-minute cycles.