You should understand there are two kind of DATA.
One of them is Primary data: the time, the price and the volume of trade, which are publicly broadcast by the exchange, on the fact of the transaction. Othetr, such as moving average, RSI, MACD and such indicator as Delta, BID, ASK and derived data (% of Delta, ASK – BID and so on) are the calculated data. They are calculated according to the formulas. And are derived from a primary data. So here’s the first «main principle»:
- Weight of primary data (price, volume, time) is always more important, than the secondary data: indicators BID & ASK, and any other derivative indicators (MA, ROI, RSI etc.), which are calculated according to the formulas.
The second one about time.
- The data on volumes may be formed for different periods. The volume of longer period is always more important than the smaller one.
For example, you’re analyzing the volumes of an hour and a day. And see that there are several levels. One of which is formed during an hour, the other one – during a day, and the third one – during a week. So that, the most important level is the level of a week, then – the level of a day, and the least important is the level of an hour.
And the last about speed.
- The speed of volume accumulation is very important. It is always important to keep track of how quickly the volume was stored. If a certain volume at some price was accumulated for 5 minutes, and then the same volume at a different price was accumulated for 1 hour, it means that the first volume will always be more important than the second one.
What does this mean? This means the aggression, with which buyers and sellers were protecting the level. The more violent and aggressive the struggle is – the stronger the effect of it. On the other hand, the accumulated volume significantly extended in time may not give such a pulse.
Have a good profits!