A dilemma
Earlier this week I was working with a trader who was having some confusion in his trade locations. He thought he saw a good trade setup, but then it didn’t materialize. This occurred more than once. From his personal review of his trades (an excellent practice), it became clear that he was missing good opportunities and taking either poor ones or ones with little potential to move.
What to do?
Whenever I get out of sorts in my trading, I look to go back to the basics. What is it fundamentally, that I am missing? This is always a good question for me to ask for my own personal trading, and it seems useful for my students as well.
As we reviewed the fundamentals of the market, it was clear that in the current market environment that every other day or so, the market comes back to test its support level. This is a fundamental principle of the Wyckoff Method in market conditions like the current market. On the daily chart through Wednesday afternoon, I’ve put small green arrows at the locations where this occurs over the past few weeks. The bigger green arrow was what was discussed for Wednesday.
How this was applied
That level for Wednesday – from 1500 to 1498, with 1499.25 selected as the 2-day high – was transferred to the intraday chart. You can see we came down to and naturally held that level twice this morning. While we didn’t get a blasting off from here into new highs, we did get a decent move for what we anticipated to be more of a range-bound market for today.
A little later in the day
Not everything can be anticipated ahead of time, but knowing the levels puts us in the right position when the market moves on its own accord. Later in the same day gives us a good example of this. Note that after having lackluster rallies off the support line of 1499.25, the market broke down through that level, indicating weakness and a likelihood of falling lower. As the market rallied weakly back up above that level, it set up a short trade. A little later, another short trade occurs after the second break of the support line.
So, for a day where it was expected to be relatively range-bound, we had a few nice trades for small targets that add up to a good trading day.
This is the way i like to trade and what I teach: find those key chart areas that every trader can see and look to make a trade in those locations if the market acts correctly at those points. You can see here it did. We do this every week in Deep Practice. A group of traders meet to assess a market condition through it’s higher time frame, and then walk forward on the lower time frame placing and managing trades. It is highly educational, including reading bar-by-bar, assessing supply and demand, trade initiation, trade management, target objectives and more. We typically run for 90 minutes and everything is recorded, so you can watch it at your leisure. It is inexpensively priced, and as a bonus, new members get the previous four weeks’ worth of sessions free. Learn more here: Deep Practice
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