trading what you think will cost you
DESCRIPTION
http://www.premiertraderuniversity.com/system -- Your Free Trading System The difference between two traders was I was tuned into a changing game without a preconceived idea as to WHY. While I didn’t know the reason for the buying, I did know that zones, especially higher time frame zones, have price interest on both sides of the coin. The momentum to the upside was simply a red flag that buyers may be gunning for what lies around that zone. That forces a wait and see sitting on the hands attitude.TRANSCRIPT
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I was talking with a trader which included an exchange of charts. That’s
not something I usually do but considering this person is a “friend”, I
made an exception.
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The trade was based on a confluence of major turning points and a few other factors. Thinking this was a
probable place of trading decisions, I was looking out for a move. What the move would be though, I did not know but taking range out of the equation:
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- Price would bounce - Price would break the zone The exciting thing for me was this “grasshopper” trader was watching the same zone so I knew they’ve picked up something during our talks.
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The difference though was he took a loss on the trade and I took a win. Let
me show you the area we were looking at for a trading decision.
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1. Saw price break down from this area and also had other variables not included on this chart 2. Price rallies back up into the zone for a trading opportunity
My friend shorted in the zone and was quickly taken out of the trade. His reasoning was sound…until it wasn’t.
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He saw smaller candles forming which indicate a loss of momentum. When
the larger candles showed up, he reasoned it was suckering in longs to take them out once price reached the
zone.
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Wouldn’t be the first time that happened, right?
My reasoning for not shorting but
playing a bounce long was also sound.
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1. High profile trading zone would have interest for other traders 2. I didn’t presume to know what the larger candles were doing…except buying…a lot 3. Waited for market to show its hand
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The playing field changed as soon as the small candles were erased by the
thrusting price action.
For me, when price is rallying with strength into a zone of interest, it
raises a red flag.
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Knowing there would be orders at the top end break of the zone, if I moved the market, I would use this strength to take them out. …and that’s what
happened.
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Still no trade for me yet.
I watched price drill the zone and then waited to see the retest.
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The retest was muted in strength compared to the breakout of the
move. I anticipated a bounce because of that and the bottoming tail into the
zone was the entry area.
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Here’s the kicker….I was open to a failed break out short but that all depended on the break out itself
including how price retraced back to the zone.
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Retrace with strength = No long play Retrace with weakness = Long play
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The difference between two traders was I was tuned into a changing game
without a preconceived idea as to WHY.
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While I didn’t know the reason for the buying, I did know that zones,
especially higher time frame zones, have price interest on both sides of the
coin.
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The momentum to the upside was simply a red flag that buyers may be
gunning for what lies around that zone. That forces a wait and see
sitting on the hands attitude.
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As you can see, bears did not have a chance when the train started rolling.
Lesson…..trade what you see…not what you think.
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