Illogical Trade

Farleigh Alan is a professional trader and mentor for more than 16 years. He is the author of bestselling book "The Master of trade fluctuations for" leading the column for RealMoney.com and editor of the newsletter "The Daily Swing Trade".

Curved logic can invent a very profitable trading strategy. For example, we are taught to buy and sell breached up to breakthroughs down, but some market players sometimes make the contrast. They wait, when the movement zahlebnetsya and then sell to break up or buy on break down. These players are not illogical to finish it. They go ahead and buy, where the failure to break once again fails. Let's try to explore this way of thinking. Most of us were beaten track - we buy because the market overflows resistance, but kontrigroki know exactly how we will react when our remarkable breakthrough top falls like a stone. Therefore, they suggest, where we stop-order and includes a short position for the same price, to earn money for our failure.

Now, let's talk further. Price breaks up - you sit bezdeystvuya. Then the price decreases to the point of a breakthrough - you continue to wait, not taking anything. But when the price jumps back above the price break, you buy. And you are!

Modern markets are trying to dislodge each before they begin definable trend. My friend Bo Yoder calls this the "rinsing". Whether it is because of manipulation or mechanics, but the price is like magnet attracted to the top and bottom to the normal level of support and resistance. This stop-motion vychischaet warrant before the market starts to move above or below. It is not pleasant when you are caught, but there is great opportunity when you're on the side.

How to price the "know" where there are stop orders? The answer is very tortuous. Retail traders are well versed in the basics of technical analysis. They open positions, using general methods already dismantled fast money. As a result, the price goes through the support and resistance is much more easily than in the past. But do not despair. Whenever the market invent a new way to take away your money, it also gives you a new way to do it. Using modern graphics programs can more easily locate failures and failed to take advantage of hidden trading opportunities. Let us consider two examples.

Figure 1, CEFT

We had the situation for the game to break. Using the Fibonacci tool, we built the two key recovery. Please note, as this tool provides the exact price at each level. Using this tool, we predicted that the market will return next time with a mark 29 and will begin to rise to its maximum (3 December). But the price did not go that way. Four days later, the market made a GEO-down through the entrance and made a goal crazy leap to 50-day moving average. Price made this breakthrough in the early session, and unfolded, to close back above level 29. The next morning, made the price higher than the GEO purpose of entry and completed the essential model of a turn from one bar to "abandoned child". Then the market made a rally to test the old maximum. Fortunately, GEO-down was to keep traders on the movement away from the game. The most effective strategies for trading limit after the entry of unusual GEPov. But already open positions have a stop-order and in the middle of the "rinse", because it seemed like a safe level for the price chart. Here we have an interesting class of trade - the price to secure the most dangerous. Is it illogical?

Let's look at another example - schedule OXP. We looked at the intra-day bars for the last 2 trading days (in red circle) and predicted an immediate break-up. Wrong! The market decided to go in the opposite direction on the same day. See how the graph clearly shows "gargle," which fills the GEO before the price finally jumps back to the line of resistance.

What happened then, even more interesting. The market spent the week going into a tight little ball. In fact, the last bar before the break showed "NR7" - the term for the traders on the movement of the bar with a narrow range of the last 7 bars. This quiet signal often precedes the main price movement and control is a sign of the market, ready to move.

based on www.esignaluniversity.com