Hi Traders I want to bring up a topic for discussion.
What do we do when price trades past our planned entry point. That point is often a pivot, trendline, planned level of support or resistance, fib, or pysch number.
So what do you do? I would like to suggest that there is much more to the equation than just these popular support and resistance theams. Think about what causes significant money to flow into the market, is it really all these levels or indicators that so many books and self proclaimed teachers say are the be all to end all ways to trade? I say NOT. So if not then what? We all know that the major players in the market are large funds and institutions. Where do they get all that money for the orders they place? How about a major electronics company in, say, Japan ships its goods to the USA and the dollars flow back to JPY then some large firm handles the exchange. Bam you have a major market participatant. So 500M needs a new home and if you dumped it on the market all at once then that would move price and you would only get a average of a 100 pip range, right? Not good because I as the customer want a stable price when I do business. Bam, I create the consolidation area where I can hold price for several hours while I put my clients money to work and then when that is done if I do it right with some help from my buddies firms we can overwell the market and then move it hard in one direction with my firms money in the market to the next level and then take my profit as the next group of firms set up their move and trades.
How many times have you planned on a level and whatched it blow right through?
The market has to become net short/long to move hard and needs significant money flow to make it happen.
To find enough contracts to fill all the orders on the book firms have to hit stops to collect orders.
By running stops firms can collect more orders in a specific area while the hold price relativity steady.
Notice how during a violent move the few candles that make up the move have relatively small volume compared to the large volume during the consolidation period.
What do you think? Still thinking a MA cross or a stochastic cycle is the bomb? Do you think they lead or lag? All averages have to have price MOVMENT to move themselves. Are the Big Boys putting their money to work based on indicators? Our friend, Wayne McD says “Pump and Dump”. Predicting price movement is what makes money and if you can’t predict then you are tardy to the party.
So when, Time of day, and where, Consolidation and stop runs are where its at.
I post to start discussion, What do you think?