Market Structure - ADDA
4 Phases of Market Movements in ForexThe market direction is changing over time, which is dynamic. ADDA is short form for Accumulation, Distribution, Declining and Advancing, it is an understanding of the market trends we often see as uptrend, downtrend and sideways markets as described below:-a) Advancing Phase - Uptrendb) Distribution Phase - Sidewaysc) Declining Phase - Downtrendd) Accumulation phase – Sideways
The diagrams above shows the 4 phases of the market movements.
As a forex trader, we must be well verse to tap and identify those phases. Not only that, we need to understand the nature of the phase and how to enter the market wisely based on those 4 phases. Without knowing in-depth it is very difficult for us to succeed in our trading. Everyone knows that, knowing market trend is very important and any decision of entering market shall be correlated with market trend, but in reality we fail to recognize the trend properly thus has caused failure in our trading.
To find out the market trends mentioned above, we can use Moving Average MA (20) and MA (50), Exponential type, abbreviated as EMA 20 and EMA50. The combination of the EMA 20 and EMA 50 will provide a solid understanding of the market trends. The combination of EMA 20 and EMA 50 is also known as Value Area (VA).
By using this Moving Average (EMA), we will be able to identify the phases of ADDA more clearly and easily. See the diagrams below when MA is inserted into MT4
For us to enter the market, we focus only on the Declining and Advancing phases because in these phases we can easily identify when and how the big player performs or manipulates the market. Try to avoid entering the market during the Distribution and Accumulation phases.
This will be discussed further on 5 September 2020 @ Trader Fair Malaysia, see you there!