Understanding POI Meaning: How traders identify price interaction zones in the market

In technical analysis, POI is a key concept that stands for “Point of Interest.” To understand the meaning of POIs, it is essentially to find specific areas on the chart where the price reaction is likely to occur again. These zones act as “memory points” in the market, and traders predict future price movements by identifying them.

POI meaning analysis - the essence of points of interest

POI is not a mysterious concept, it is a specific area on a chart based on historical price abnormal movements. POIs are formed when prices show significant market participant activity in these areas.

Unusual price movements observed by traders include large candlesticks accompanied by long fluctuations, price gaps, false breakouts, apparent demand or supply imbalances, and strategic entries by market makers. These phenomena all indicate that there is real liquidity and trading participants active in the area.

Why is POI so important? Because the market is repetitive. Areas that have historically triggered strong price interactions often become places where prices “stay” or “rebound” again in the future. That’s why traders say that POIs are like “price magnets” – they attract price returns again and again.

Top 5 POI Patterns – Price Signals Traders Must Know

The key to identifying POIs is learning to observe several typical price patterns:

Breaking through the candle: When you see a huge rising or falling candlestick on the chart with a surge in volume, the candlestick itself constitutes a POI. This breakout usually signifies a significant liquidity entry and is a key turning point in the price.

Refuse to use candles: A candlestick pattern with a long upper and lower shadow, such as a hammer or a shooting star, indicates that the market is experiencing significant resistance in this area. These candlestick price levels often become key support or resistance levels in the future.

Liquidity gap area: An empty area formed when the price skips an area and is not sufficiently filled. The market usually tries to “fill” these gaps, making them significant POIs.

Demand and supply imbalance: An area where a large number of buy or sell orders are concentrated. Such zones mark the gathering place for trading participants, continuously attracting new price interactions.

Traces of entry of market makers: Areas identified by large orders and rapid price movements, indicating that institutional-level participants are active here.

POI Trading Strategy – The Complete Process from Confirmation to Execution

Once you understand what POI means, it’s crucial to translate it into actual trading decisions. The complete transaction process consists of three steps:

Step 1: Accurately confirm the timing of entry

Wait for the price to revisit the identified POI area. It is not enough for the price to approach the POI, you need to watch for the appearance of a reversal signal - such as a reversal candlestick pattern, a clear break in the price structure, or other technical confirmation. This step is the most patient test because you have to find a balance between the FOMO of the crowd and your own rationality.

Step 2: Scientifically set up risk management

The stop loss position should be set on the outer edge of the POI, usually 10 to 15 pips below or above the POI. This distance prevents you from being stopped by market noise and controls the real risk. Remember, trading without a stop loss is like walking in the dark.

Step 3: Scientific setting of the target location

When you enter a trade from a POI, the target can be set at the next key resistance level, a previously created high or low, or even the next potential POI area. Let the profits run, but also set reasonable goals.

XRP Real Case - Application of POI in Coin Trading

To make the concept of POI more specific, let’s look at a practical scenario: let’s say you are observing XRP on a 15-minute chart.

Suddenly, a massive ascending candlestick appeared that pushed the XRP price from $1.9500 to $2.0000 in a short period of time. What does the appearance of this candle mean? It marked the $1.9500 to $1.9600 range as a key POI – a clear tipping point for the price.

Two hours later, the XRP price pulled back near this area. Now, should you buy now? No. You need to wait for more confirmation. When the price appears near $1.9550 with a hammer-like candlestick, this is a real trading signal – it indicates that buyer support in this area is in play.

Based on this confirmation, you can reasonably expect another upward attempt at the previous high of $2.0000. At the same time, your stop loss can be set below $1.9450, so that the risk is clearly defined.

Important: The above cases are for teaching and demonstration purposes only and do not constitute any investment advice or trading recommendation.

Combination of technical indicators - maximize the effectiveness of POI

The power of POI lies in its alignment with other technological tools. Using POIs alone can get stuck, but when combined with other metrics, it can significantly increase the success rate:

Market structure and trend identification: First, judge whether the overall trend is rising or falling. In an uptrend, POIs should provide support; In a downtrend, POIs should provide resistance. Let POIs work for you, not against the trend.

Confirmation of moving averages: EMA 50 and EMA 200 can help determine the nature of POIs. If the POI is above the moving average, it is more likely to act as support; Otherwise, it may act as resistance.

The power of volume: The price rebound from the POI is accompanied by a significant surge in volume, which constitutes additional confirmation. High volume represents real market participation and is a key indicator of the durability of the rally.

Transaction Risk Alert – A common pitfall when using POIs

Even after understanding the meaning of POI, many traders still make mistakes in practice. Here are the most common pitfalls:

The temptation to enter too early: Enter in a hurry before the reversal signal is fully confirmed. The market punishes this excessive optimism.

Ignore the big picture trend: Focusing on a single POI while ignoring the overall direction of the market. Contrarian POIs tend to be riskier than homeopathic POIs.

Ditch risk management: Once you have a profitable position, close the stop loss or expand the position. This is the main reason for the account explosion.

mismatch of time frames:P OI has different performance in different time periods. It is recommended to use POI for short-term trading on 15-minute charts or larger and avoid overtrading on 1-minute charts.

Mastering the meaning of POI is just the beginning, and the real ability lies in enforcing discipline, managing risks, and maintaining patience. The market will test your resolve again and again, but if you stick to this approach, the probabilities will be on your side in the long run.