Warning: Fairly long somewhat theoretical post
I have read somewhere criticizing the system for not providing any reasons why dance works. Dont remember where i read that though.
Anyway have been thinking about it for some time now. Here is what i think:
1. Its based on self fulfilling prophecies. When there is a big move say upwards, people who didn't buy lower (Even worse who sold lower) are left frustrated. They will certainly look to re-enter (Or cut shorts) on any pullback. Now, everyone will look at different things- Mas, fibbo, pivots. That's why Confluences work so well. It just means many types of traders are looking to enter there.
2. Also notice that we look at steepness of MA. This shows how fast market has moved and how greedy traders must be after seeing this move. If its fairly steep nobody will like to miss it and they will jump at 10EMA. If its flat they will wait for 35/50 ma.
3. Finally, note the two bar rule. Why it's there? Suppose price breaks out north sharply. Now as it falls towards our entry at 10 EMA, we want buys to be concentrated at 10 EMA. If its falls slowly in many bars that means many buyers have already jumped in before price reached 10 EMA - meaning buyers were distributed at different levels during fall. However if it falls sharply that means buyers are holding their guns and their power will be concentrated at 10 EMA.
Hope that makes sense to someone.
I have read somewhere criticizing the system for not providing any reasons why dance works. Dont remember where i read that though.
Anyway have been thinking about it for some time now. Here is what i think:
1. Its based on self fulfilling prophecies. When there is a big move say upwards, people who didn't buy lower (Even worse who sold lower) are left frustrated. They will certainly look to re-enter (Or cut shorts) on any pullback. Now, everyone will look at different things- Mas, fibbo, pivots. That's why Confluences work so well. It just means many types of traders are looking to enter there.
2. Also notice that we look at steepness of MA. This shows how fast market has moved and how greedy traders must be after seeing this move. If its fairly steep nobody will like to miss it and they will jump at 10EMA. If its flat they will wait for 35/50 ma.
3. Finally, note the two bar rule. Why it's there? Suppose price breaks out north sharply. Now as it falls towards our entry at 10 EMA, we want buys to be concentrated at 10 EMA. If its falls slowly in many bars that means many buyers have already jumped in before price reached 10 EMA - meaning buyers were distributed at different levels during fall. However if it falls sharply that means buyers are holding their guns and their power will be concentrated at 10 EMA.
Hope that makes sense to someone.
Making money is easy- Just dont take losing trades