GBPAUD: A Case Study in Midpoint Confluence
Probability of a midpoint projecting a valid future reversal point is increased if multiple midpoints show confluence at the same zone. Case in point, here the Swing low A, followed by midpoint E (breakout midpoint), projected a swing high at F.
However, there was a smaller swing along the way which also hinted at swing high F: Swing high B, followed by midpoint C (split between the two strongest down bars in that swing) suggested a swing low at point D. This was a valid buy area on it's own. But better yet, the 1.618 extension of swing B-C-D gave additional credibility to the expected swing high of swing A-E-F.
When multiple different swings line up and point to similar reversal zones such as here, the market can be considered to be in a very harmonious state and such setups have better odds of resulting in a winning trade.
However, there was a smaller swing along the way which also hinted at swing high F: Swing high B, followed by midpoint C (split between the two strongest down bars in that swing) suggested a swing low at point D. This was a valid buy area on it's own. But better yet, the 1.618 extension of swing B-C-D gave additional credibility to the expected swing high of swing A-E-F.
When multiple different swings line up and point to similar reversal zones such as here, the market can be considered to be in a very harmonious state and such setups have better odds of resulting in a winning trade.
