We look at price from a closer perspective now. Around 115 there appears to have been some kind of a halt. Even though this may look like a wonderful opportunity to those who like to just buy at the support to go long, I would be careful around here.
The problem isn't that buying around support is a wrong activity. What's problematic and at times dangerous is not keeping the context in mind. It is clear that price drop has halted for the time being. Notice though, the kind of strength price has shown to go up. So far after that drop from 120, price has showing little gumption to cross 117. The behaviour so far is showing that although the price has stopped going down there hasn't been a sustained and strong upside pressure shown by price. Until that spark of strength shows up we're left to conclude that the long side is to be avoided.
For me cash is better at this juncture. The downward movement has halted for now and it's the end of the year with focus a bit reduced on the price action. Perhaps the new year will bring an opportunity to initiate some kind of a position. Considering the drop so far from 138, it wouldn't be too far fetched to assume there are going to be some rallies during this down trend, a downtrend that's been going on for some time.
Does the fact that price has been dropping for this long have any influence on our decision making? In my case, yes, it does. I am a bit hesitant in initiating shorts this late in the game or without some kind of a substantial rise. This may not be the correct thinking, but a person has a right to not engage the market when not completely aligned with it. Those with quicker fingers and greater asset distribution might have a different mindset to make use of the opportunities on the short side now. We've had a short from 129 to 119, and a scratch with a loss of 1 point. All in all it hasn't been too bad. The idea is to keep the focus and follow our plan.
Almost all of the drops have had seen price make new lows and then consolidate for a week or so. It's not a guarantee that it's going to keep repeating the behaviour in the future but it is something to just take a note of. All we're trying to do is assess the relative strengths of the demand and supply, and decipher which side has the upper hand, and whether that strength is sufficient enough to warrant an action. So far we've been silently folding our cards.
From Zen and the Art of Poker:
RULE #1: Learn to use inaction as a weapon.
Most of the time, the market is indeed random. One can only win consistently by avoiding activity most of the time and trading only the few times during the day when a high probability trade occurs. It is our job as traders to wait more than we trade. (William)
One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do. Most people always have to be playing; they always have to be doing something. They can't just sit there and wait for something new to develop. I wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime. Even people who lose money in the market say, 'I just lost my money, now I have to do something to make it back.' No, you don't. You should sit there until you find something. (Jim Rogers)
Using inaction as a weapon means simply that one must learn to be "aggressively inactive" while waiting for what he has proven to himself and for himself to be high-probability setups. Someone else may think that his HP setups are completely loony, but that's not the point. They are his bread-and-butter setups, and whether or not anyone else can profit from them is irrelevant. He wouldn't be implementing them if he weren't making money with them. Unless, of course, he himself is loony.
It is the nature of trading that the trader is going to spend a great deal of time waiting, unless he doesn't have the discipline to wait for what he wants (though he must of course also know what it is that he wants, which is where defining the setup comes in). If the trader doesn't know exactly what it is he's looking for, then he is far more susceptible to being sucked into low-probability trades, particularly if he is eager to trade. By thinking of inaction as a weapon and using it as such, he will find himself aggressively withstanding the Sirens who are tempting him to act impetuously. He will be "aggressively inactive". (DbPhoenix)
Gringo
The problem isn't that buying around support is a wrong activity. What's problematic and at times dangerous is not keeping the context in mind. It is clear that price drop has halted for the time being. Notice though, the kind of strength price has shown to go up. So far after that drop from 120, price has showing little gumption to cross 117. The behaviour so far is showing that although the price has stopped going down there hasn't been a sustained and strong upside pressure shown by price. Until that spark of strength shows up we're left to conclude that the long side is to be avoided.
For me cash is better at this juncture. The downward movement has halted for now and it's the end of the year with focus a bit reduced on the price action. Perhaps the new year will bring an opportunity to initiate some kind of a position. Considering the drop so far from 138, it wouldn't be too far fetched to assume there are going to be some rallies during this down trend, a downtrend that's been going on for some time.
Does the fact that price has been dropping for this long have any influence on our decision making? In my case, yes, it does. I am a bit hesitant in initiating shorts this late in the game or without some kind of a substantial rise. This may not be the correct thinking, but a person has a right to not engage the market when not completely aligned with it. Those with quicker fingers and greater asset distribution might have a different mindset to make use of the opportunities on the short side now. We've had a short from 129 to 119, and a scratch with a loss of 1 point. All in all it hasn't been too bad. The idea is to keep the focus and follow our plan.
Almost all of the drops have had seen price make new lows and then consolidate for a week or so. It's not a guarantee that it's going to keep repeating the behaviour in the future but it is something to just take a note of. All we're trying to do is assess the relative strengths of the demand and supply, and decipher which side has the upper hand, and whether that strength is sufficient enough to warrant an action. So far we've been silently folding our cards.
From Zen and the Art of Poker:
RULE #1: Learn to use inaction as a weapon.
Most of the time, the market is indeed random. One can only win consistently by avoiding activity most of the time and trading only the few times during the day when a high probability trade occurs. It is our job as traders to wait more than we trade. (William)
One of the best rules anybody can learn about investing is to do nothing, absolutely nothing, unless there is something to do. Most people always have to be playing; they always have to be doing something. They can't just sit there and wait for something new to develop. I wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime. Even people who lose money in the market say, 'I just lost my money, now I have to do something to make it back.' No, you don't. You should sit there until you find something. (Jim Rogers)
Using inaction as a weapon means simply that one must learn to be "aggressively inactive" while waiting for what he has proven to himself and for himself to be high-probability setups. Someone else may think that his HP setups are completely loony, but that's not the point. They are his bread-and-butter setups, and whether or not anyone else can profit from them is irrelevant. He wouldn't be implementing them if he weren't making money with them. Unless, of course, he himself is loony.
It is the nature of trading that the trader is going to spend a great deal of time waiting, unless he doesn't have the discipline to wait for what he wants (though he must of course also know what it is that he wants, which is where defining the setup comes in). If the trader doesn't know exactly what it is he's looking for, then he is far more susceptible to being sucked into low-probability trades, particularly if he is eager to trade. By thinking of inaction as a weapon and using it as such, he will find himself aggressively withstanding the Sirens who are tempting him to act impetuously. He will be "aggressively inactive". (DbPhoenix)
Gringo