It Truly is a Learning Process

A few emails came my way in response to my post and video “Trading What You Think Can Cost You”. Most of the emails talked about breakouts and a few talked about moment to moment trading.

I want to write about moment to moment trading as zone breakout trading is not something I generally am interested in. The market tipping its hand is something I find more successful in the long run.

In the referenced post and video, it looks simple when deciding on what to do with a potential trading situation. In truth, the concepts are very simple but not always easy to implement.

The fact is that each moment is a unique time in the market. Well, that is fact for me. For instance, when price rallies towards a resistance level like we saw in , there are a few actions that could have happened including:

1. Price could rally with strength
2. Price could rally with weakness
3. Price could break through the resistance level but not enough demand to continue

…there are quite a few possibilities which is why trading is not easy. The rally in this case could have taken many forms which puts a stake right through having any certainty until price tips its hand. It could have been a lack luster rally throughout which will set up a different situation than one that bounces off the lows and rallies with strength right to the zone.

There were however a few thoughts, questions really, that were floating through my head as price unfolded. I knew this:

  • For price to continue upwards, I needed to see strength on the rally
  • For price to hold the former resistance and now potential support, I needed weakness in the pullback

The key was where to direct my attention to on the chart and that was simply an area where price had dropped from….as in there is history at this price level. A history that meant something.

How did I know it meant something?

I was aware of the large decline from that area which indicates something different than if it was shallow. It was also a higher time frame zone that had a few common technical factors involved.

How price rallied would have not meant anything to me unless I had context and that context was the resistance structure. I became interested in price when it was heading towards an area of interest. Not interested in taking a trade but interested in seeing if there was potential for a trade.

The next issue would be if I had the confidence to execute when give the opportunity. It’s quite meaningless to see something set up and then not pull the trigger. Many people who enter the trading world underestimate the power risk and uncertainty have over you.

How do you deal with it?

That is not something anybody can really tell you how to deal with. You simply have to be able to do it. Hesitation can cost you money.

I read the action pre and post break of the zone and that zone was identified long before price reached it. There was nothing to indicate a shorting opportunity. There was something that indicated a long opportunity.

The next issue is operating in a realm of uncertainty. Yes, price was telling a story but how often does the ending of a story not match where you presently are in the story? Anything could have happened.

That anything includes getting stopped out. And I was ok with that if it happened.

All of this takes time and is not something you get from a $97 e-book. It’s developing, a process really, into someone who in an atmosphere of uncertainty and risk, is comfortable enough taking a trade when the situation is inline with what constitutes a trading opportunity.

And picking themselves up and doing it all over again if faced with a loss.

Trade well.

For more updates from Mark and the team at NetPicks, be sure to visit their trading tips blog at NetPicks.com.