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Is this indicating that the longer term buyer is buying enough contracts to expand the value area? |
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I see it in a little different way. A perfectly balanced
value area should have a normal bell curve shape with the
POC fitting perfectly in the middle. Now, because of the longer-term activity presence (but not strong enough to move the entire
value area to a different level), this curve becomes distorted and the
POC moves somewhat higher or lower (depending on who's driving it) while the value's limits remain untouched.
As for me, I don't really understand this line:
The imbalance we are looking for is on the side with the least amount of activity because the longer-term trader is only a small percentage of total trade in the value area.
How can the imbalance be on one of the sides? As my understanding goes, imbalance can be either on both sides (too much on one side and to little on the other) or there isn't any. But according to the text we are looking for imbalance on the side with the least amount of activity... What exactly does it mean?
Moreover, why would we focus on the side with the least amount of activity? I'm not sure if I'm getting this correctly, but it seems to me that the author divides the
value area in two parts - the one with the smaller number of TPOs is assumed to be dominated by the long-term traders, and the other by the short-term traders. As this strict division wasn't awkward enough, if we applied it to the example, it would basically mean it's the long-term seller who's more active in the
value area: 89 TPOs below
POC are short-term trades and 70 TPOs above represent long-term participant (the one we are trying to analyse), hence it has to be the seller because he is doing his bussiness above the fairest price (the
POC). Obviously, 70/89 TPO count favors the buyer if interpreted correctly, so there has to be some error in my logic (though I can't say where)...