Trade The Market That Is In Front of You

Intermediate

That’s another way of saying “trade price action.” Why? Because price is the only true indicator of where a market is going. It’s the only point in the universe where you know if you are right nor wrong. We spent a lot of money developing our algo that tells us where these inflection prices are; the exact points from where the market will move.

One of the beauties of inflection point trading is that you can enter the market with a minimum of risk. Our algo is able to do it with between 5 and 15 pips of risk. And this is for swing and long term trades. Do you realize what this does to your risk/reward ratio? Since our average winning swing trade nets us 250-500 pips and our average long term trade about 500-1,000, we only have to be right about one out of 5 or 6 times. Traders using wider stops have to be right a lot more often…..perhaps 70% of the time; and that’s not easy to do.

There’s also a positive psychological element to taking minimum risks when entering a trade; your losses are small and you NEVER hold losers. After all why would you hold a trade when it was moving away from your inflection point? Similarly, price action trading will keep you in your winners. If price was above your inflection point, why would you get out?

Another aspect to our style concerns money management. Our algo is programmed to take quick partial profits and put break even stops on the contracts we keep. So often a market will jump in your favor and then crash below your entry point making you a loser. And then a trade becomes an investment…the worst possible scenario. And so the magic is…..enter your swing and long term trades with minimum risk, take partial profits quickly and hold the rest with your stops at breakeven; a winning formula.

 

Another step has to do with what types of charts you are looking at. If you are interested in swing and long term trades there’s no reason to look at charts below dailies and weeklies.  You are not going to find an 800 pip move on a 1 hour chart. Leave the small charts ( 5 min, etc:) to the day traders. They are more interested in buying small dips and selling small rallies than they are in the big moves. They are going to frustrate you on occasion with their activity because they basically prevent movement during the day; unless they are overwhelmed by major news.

Also you don’t want to be in the business of picking tops and bottoms…..its a useless occupation. Get in the habit of buying strength and selling weakness or another way of saying it is “go with the trend.” You also want to buy the strongest in any group and sell the weakest. How do you know which is weakest and which is strongest? Just measure them both against the same thing…..an industry measure or another currency or index.

One last note. It’s a known fact that basketball teams who “press” on defense hate to be “pressed” themselves. Similarly the markets love to reverse quickly and make everybody a loser, but hate to be reversed on themselves. You can learn how to reverse your position on a dime and take advantage of the fast and powerful moves that come from everybody being wrong and scrambling to get out. Failed formations (like head and shoulders) or failed technicals (like Fibonacci retracements) are two of the many good places to do this.

In summary, don’t trade your opinion, don’t guess, don’t hold losers, stay in your winners…..just trade price action…..prices tell you exactly where you are right or wrong.


Latest News

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Yen stays strong in risk off scenario

Last Friday’s very weak German Manufacturing Purchasing Managers’ Index data was another blow to the global economic backdrop, with concerns throughout this year of a global slowdown in China, through Asia Pacific and increasingly also in Europe. This has seen riskier asset classes come under negative forces over the past week into latter March, with … Continued

Euro vulnerability

A Euro plunge in the latter part of last week, on Friday driven by very weak German Purchasing Managers’ Index data. Furthermore, the US Dollar has seen broader strength again on Thursday-Friday against many major currencies, after US$ weakness was seen immediately after a far more dovish Federal reserve at their meeting on Wednesday. This … Continued

EURUSD Still stumbles at the 200-day MA

The Euro was the weakest currency on Friday The EURUSD cannot break above to 200-Day Moving Average There may a small bounce on Monday morning As European slides into recession EURUSD will fall to 1.1000 The 200-day moving average (200 DMA) has continued to prove a stubborn barrier to the upward path of EURUSD. This … Continued

Current Market Analysis
Euro breaks down, GBPCAD threatens upside

US Dollar Index holds support and rebounds EURUSD seeds multiple negative signals, downside risks GBPUSD sends buy signal GBPCAD sets up more bullish AUDUSD negative and USDCAD buy signal USDTRY and USDBRL surge

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