Quote from bighog:
Lets keep it simple, short and sweet. EXAMPLE: you are looking at price approaching a resist level for the first time and you want a continuation of price advancing up from the previous leg. Lets assume the resist is yesterdays high price. Price gets to within 2 ticks of the resist and starts to slow down and actually retreats some. Many will assume the resist has held and rookies will actually go short............... WRONG!!!!
Price sniffed the previous resist area like a dog at the hydrant, the dog and the trader both know what they want but are suspicious. Price went up and backed off because the rise in price slowed down as the longs saw no new blood coming in to push price past the resist so they took profits before the resist point and that caused the small retracement. The sellers gained no floowers either as the retracement was shallow which told the longs and potential new longs to expect another attempt at the highs. The dog is thinking seriously about claiming the hydrant because he does not smell danger as he like thre traders still know what they want.
maybe we see the same scenario played out for a second time. NOW the next test is going to be serious because a mkt that can not go up will come down from the simple fact of no buyers to h9old price up and thus the longs will want to sell out of a weak mkt.
On the 3rd try price takes out the high and your job changes from watching for a breakout to be on the alert for a false breakout. Once price breaks out you immediately want to see price follow through by bringing in either new longs that are now believers or shorts bailing out and buying to cover their ass. You care less who, why the buyers are because your mission is simple price action.
IF price starts to slow AFTER the breakout you again immediately assume you are in danger because the new blood in not coming into the mkt. The dog that just let loose would run if another dog came along and chased him away from his new hydrant.
Learn how to WORK breakouts and you will not be afraid of them because you can manage a flase breakout. You must take the breakouts in order to catch the "RUN". There is a reason why chickens are food for others as there is a reason why lions are the KING of the jungle. Which are you?
False breakouts can actually be good to pay for commissions because most breakouts will give you a few ticks and if you read price action properly you can grab a couple ticks before it comes back to the breakout point.
Put yourself in the other traders shoes and imagine what they will do when price does what price will do.
there is no way to tell about price action because we all react as we will when price does what price will do. This is a mkt of the PLAYERS and the shorter the time frame (down to 5 minutes only because less than that is just noise and trading noise is a fools game), the less fundamentals and blabber, a bias, thinking etc matter. Your game is to trade and not to intellectualize this stuff. Trade it or be square.
OK, thats it to many posts this weekend. Winter is cold and sleet out so stuck inside this weekend. Far, FAR less posts and chat this new year. Enjoy the new year.
