Lesson #2 - Plum - Resistance
Plum levels are one of the key elements 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, although they are located much further from the current price, making them rarely reached but extremely 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.
Characteristics of Plum Levels
Plum levels, as part of the DML levels for the EURCAD currency pair, are characterized by exceptional precision in price reaction. When the price approaches these levels, it often results in a notable rebound, emphasizing their significance as strong points of resistance. In cases where the price breaches the Plum level, there is a significant probability – exceeding 95% – that it will return to this level. Such dynamics demonstrate the dominant strength of these levels in determining potential future price movements.
Models for Trading Plum
There are two main models for utilizing Plum levels in trading strategies:
Reaction to the Level: This model involves observing and reacting to the price approaching the Plum level. Traders expect the price to bounce off this level, presenting an opportunity to enter a trade in the direction of the rebound. This strategy is particularly effective in short-term time frames, where the precision of price reaction plays a crucial role.
Return to the Level after Breach: In situations where the price breaches the Plum level, this model 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 significant resistance levels can significantly enhance risk and capital management efficiency.
Additional Tips
Plum levels can also provide additional insights in the context of trend analysis and utilization. If the market trend is downward – determined, for example, according to the MMD methodology models (which will be covered in subsequent lessons) – and the price approaches the Plum level, it presents an excellent opportunity to take a SELL position in line with the dominant trend. Furthermore, the presence of other DML levels below Plum may indicate the possibility of a deeper correction, making the strategy even more comprehensive and adaptable to changing market conditions.
Summary
Plum 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 application 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 Plum Levels on EURCAD Currency Pair
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Advanced sets of DML levels for the EURCAD currency pair
Plum
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A complete package dedicated to those who have completed the educational process.
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Free Tools for Downloading and Visualizing DML Levels
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EURCAD
Trading the EURCAD pair is characterized by a specific dynamic resulting from the differences in the monetary policies of the European Central Bank (ECB) and the Bank of Canada (BoC). Additionally, the value of this currency pair is influenced by macroeconomic factors such as industrial production data, inflation, employment, and changes in commodity prices, particularly oil, of which Canada is one of the major exporters.
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.