Profit When Scorned Traders are Left Holding the Bag

Beloved by the people, part of a royal alliance with Spain – Catherine of Aragon seemed to have everything locked down. All she needed was to produce an heir to the throne (as if it were all up to her), and it would be clear sailing from there.

Until little Anne Boleyn and her sister pranced on the scene. A pleasant rivalry gave way to an all-out brawl – and before she knew it Catherine was sent packing (after a fashion). Jilted, scorned and thrown aside – scores would now have to be settled.

Every day in the market, there’s drama. Although it won’t be the type that draws HBO fans into a series – it will be the type that you can profit from. It comes in the form of unfinished business and you profit from the pain as it unfolds – as long as you know what to watch for.

Jilted traders that demand the attention of price

At the beginning, it all made perfect sense. The English wanted an alliance with Spain – there was a young prince in England and there was a young princess in Spain. Sounds like a fairytale wedding. What could possibly go wrong? That is until the Boleyn sisters found their way into the king’s court.

Every day, traders enter into a marriage with their entry only to be left holding the bag. It takes the form of unfinished business – specifically when auctions wrap up with buyers and/or sellers left without a counterparty. These moments can be spotted easily with Order Flow Sequence Tracking, simply by looking for the zeros – or lack thereof.

When buyers and/or sellers are left hanging, you can bet price will settle the score.

An incomplete auction with unfinished business does not have zeros at the opposing sides at the tips of each candle – upon the close of that candle. Note the ES example below which has both finished and unfinished business.

When this happens, you’ll want to take note – not for the drama, but for the fact that price won’t likely forget these levels.

Rifts created in the market that price can’t easily forget

Interestingly enough, nobody batted an eyelash when King Henry decided he fancied both of the Boleyn girls. When his attraction to Anne turned into something more – all hell broke loose. The Vatican got involved, the alliance with Spain immediately went on the rocks – and laws were rewritten. It seemed that people didn’t appreciate Catherine being left out in the cold.

While no laws will be rewritten, price doesn’t soon forget when there is unfinished business at the close of a candle/auction. This is due to the pent-up demand, at that price level that has yet to be resolved. Interested players – especially players with positions that carry influence, like the institutions – won’t be left hanging for long.

When there's unfinished business, the market takes notice until the drama is resolved.

Consider our ES example and the instances of unfinished business. It’s no coincidence that the COT (Commitment of Trader), aggressive activity (imbalances), other instances of unfinished business and reversals all center around these moments. From the very moment an auction closes with buyers and/or sellers left hanging – price responds until the market resolves the issue.

Opportunities to profit when the score is settled

Despite the diplomatic setbacks, there are any number of people that profited from Catherine’s betrayal. Those in the king’s court that were supportive of Henry’s proclivities were especially rewarded. The Boleyns, especially the father, did pretty well – as did the clergymen willing to recognize the divorce Henry wanted to clear the way for he and Anne.

The same opportunities exist in the market when there is unfinished business – albeit a bit less clandestined. All you really need to do is watch for groupings of unfinished business – and get ready to make your move. When these moments take place at a pricing extreme – you can plot your entry reversal. You can also use these levels to target exits since they often serve as solid support and resistance levels.

Stalk price when there's unfinished business, taking aim at reversal opportunities!

Note our ES example. When unfinished business took place at a pricing extreme – a reversal entry presented itself. Likewise, the exit/target reliably sat right at levels where other buyers and/or sellers were left hanging.

Mark these moments on your chart and use them to help manage your entries and exits – while everyone else gossips!

More than just a technicality – a market moment

You’d think that Catherine would just move on, but it wasn’t quite that easy in those days. Women simply didn’t enjoy the freedoms that men did in those days – and when you were dealing with a king that could take your head, things were a bit more dicey.

If you’re wondering why unresolved traders simply can’t get sorted out on the next bar/auction – then you might be missing the opportunity that goes with this unique market condition. It’s not just that the auction closed leaving buyers or sellers without a counterparty – it’s that there was interest at this price level that the market couldn’t support at that time.

This makes the occurrence more than just a technicality. It means that the market will need to resolve volume that has been left in the open. One slight of unfinished business isn’t a huge deal – more than one however, and you have the makings for a real reversal level.

If marrying Anne Boleyn was just a technicality, then Spain would have looked the other way and the Episcopal church may never have been formed. The same is true with unfinished business – on a much smaller scale.

Stalk broken hearts as you profit from unfinished business

Catherine ultimately had the last laugh as Anne was hauled off to the gallows and then executed. Seems Henry didn’t care to have his mistakes floating around where he could see them. History would go on to repeat itself as Henry racked up an impressive array of wives and jilted lovers.

Don’t let drama pass you by without at least looking to see if there’s a chance to profit. Keep an eye out for unfinished business – simply by looking for the absence of ‘zeros’ on the opposite ends of a candle. If they’re missing on either end (or both) you know that buyer and/or sellers have been left holding the bag – with no counterparty to pick them up.

Mark that moment on your chart and stalk it with confidence. When price returns – be ready to make your entry on the reversal. Be aware – just as with King Henry, things can change on a dime, with another set of traders left with unfinished business on the very next candle – so be prepared to bail if needed.

Don’t let broken dreams and trampled hearts stop you from making a profit. Enter in on the drama and enjoy the ride.

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