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понедельник, 3 мая 2010 г.

How to get lucky by the tail, when the market surprises

Picture of life - you analyzed the situation and expect the breakdown. You may have even discovered the head with his shoulders or double bottom. In any case, the final decision is made, and you just sit and wait.

Suppose you find yourself on the chart box and wait for a breakthrough. You have already positioned their orders at the right level and with the break up you will be redirected to long positions. Your conclusions are based on the clock schedule and you often checked to him, to see whether there is movement.

And then - again - the market starts to move upwards. Activated your order to buy, and you open a long position. You look at the market and make sure that your stop-loss order in place. But then suddenly, without warning, the same bar, which gave you the feeling of wealth, turns around and begins to move down.

Since the direction has changed, you know that your feet will work - what happens. All open positions you no longer have. You are targeting to open the next position or in search of a new model: but wait - you just missed an excellent opportunity.

In this lesson, I would like to tell you how you can win, when all the other losers. That's the theory. Most traders in the course of trading shall take into account only their own conclusions. Some idea stuck in their heads and sit there.

If so, they decided that they will be taken by the breakdown in long positions, then so be it. This is particularly well-protected technical levels, such as, for example, 52-week minimum or maximum. Or the trend-line or graphical model. Basically speaking, any important technical level.

If you are running only one or two markets, you know what I mean. Even if you do not listen to other traders, you'll have some idea of where the general view. there are levels of resistance or support of major currencies.

Remember that trading is like nothing else, gives an idea about the laws of human behavior. Once one of these important levels will be breached, all together will take a position with the right side. Here we reach the heart - be careful, it's important.

When the market is doing what you expect from him, there is a chance that it is to do something opposite.

For example, let us return to our example, when the breakdown occurred a transition to long positions and, in the end, everybody was a loser.

To get out of this benefit, we need two plans. Plan A and Plan B. As you may have guessed, Plan A - to go along with the crowd: if the market dramatically changes the direction of motion, and you are projecting, you can do is to recognize the power of the crowd. You have thought through the entry point, the level of stop-loss and a likely target level.

Plan B is more sophisticated. If the market will make a breakthrough in the other direction, you must also be a strategy of action.
The chart above we see the downtrend, alternated consolidation. Price goes down, forming a support, and then again rises to the upper trend line.

It is often replaced by the consolidation of a breakdown in the direction of the trend, so it is not so stupid, is planning to remain down, that the market is doing. This brings us to the conclusion of open short positions, the stop can be positioned at the previous resistance, and the target level - at the bottom of the difference between support and resistance.

But what happened next.

Instead of continuing to decline, the next bar becomes reversal.

With two-way reversal first reversal bar should be located at the end of a strong downward movement. Closing must occur near the minimum of the first bar. Preferred that this minimum has been a recent new minimum. The second bar due to open around the closing level of the closing of the first bar and fully compensate for its decline, closing near its maximum. No need to make sure that this was a reversal bar that the scheme worked (see illustration).

Well, now the market is in a completely opposite direction to that which we had expected. Being opportunists (and they should be all good traders), we have closed short positions and opened up long with a stop below the minimum abortive breakdown.

Now we have long positions with stop-loss, but we also need and target level. The first target level, I would be located on the previous level of resistance. The reason is simple. Can start a long period of consolidation and price will fluctuate between support and resistance.

However, as was a failed two-bar reversal can I hold long positions in and see what happens at the level of resistance. Depending on market conditions, you can also add a warrant for his long position.

So it is important to always be ready to wrap himself for the benefit of any market movement. When you encounter invalid breakdowns of the trend line, lines, support / resistance or unconfirmed models - always have a backup plan. Do not just watch the actions of the market, use them for the benefit of themselves.

I know some traders who just do so. They calculate the market movements, which are obvious to all, and then benefit if the opposite direction of the same market.

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