On the right track Vorbis...
Actually, it's a cluster of stops that would be created by T2 & T3. A lot of amateur traders will take trades here and put there stops just above the high for the T2 trade and just below the low for the T3 trade.
The T1 is a trade that does not look at all obvious to lots of people at the point of entry. It is quite obvious that some people did enter here as the price went up BUT it is nowhere near as obvious as those latest 2 support/resistance levels. Still the T1 trade isn't based off any pre-set level, nor is there any magic formula/rule behind it. It's not even a secret.
Of course, you could argue that lots of people taking a trade would be good as it would give power to the trade. Problem is that the 'lots' of people is often lots of retail traders who have put orders to exit the market all around the same place.
Right now you might be thinking "some hedge fund has a magic program to hunt my stops" (the
[email protected]@rds). Taking this view will probably keep you out of trouble but in fact the stop hunting computer is not the reason these trades fail.
The reason these trades fail is simple. This is the carrot. Still, I won't be such an asre and not tell people...
If you go long at T3 mechanically and objectively, you will lose money over time. This would happen in an electronic market and a non-electronic market. There is a non-technical, common sense reason for this but it would be nice to have some other opinions on this first.
Maybe HC himself will reveal some previously unseen theories on the dynamics of supply and demand which will make this clear before I do.
I think Arabians 'organic' market theory is fairly relevant to this aspect of price movement.