Answer 1 - In the space of 3hrs and 10 minutes how many trade opportunities could you spot in chart 1? The answer was two trades only.
The first trade resulted in an increasing probability that the selling pressure would wear thin and that the market would turn on it's head into a reversal mode and so a 'buy' signal was generated. The second trade would have been initiated as a 'sell' signal once the upwards reversal would have run out of steam as buyers would have tried to push the price back to the 50% Fibonacci on the last downward move. After that the market went flat and neutral. The 'buy' signal would have generated 25 pips and the 'sell' signal 50 pips.
Answer 2 - Why is the following chart so vitally important to understand?
Between points A and B lies all inclusive 9 bars which sum up the difference between success and failure in day trading. The first trade was a 'buy' signal generated. It failed and our stop loss would have been tight at 10-20 pips.
Now this becomes the important point. How many traders will fail because they cannot learn this lesson. What happens next? Most traders feel sore at the loss and will initiate another 'buy' trade 2 bars, or 10 mins, later convinced that the 'buy' trigger that failed was the fore-runner of a bigger 'buy' trigger due to the sideways pricing over the 10 min period.
Wrong!
The successful trader waits and waits and waits for the next signal trade to emerge as selling pressure runs out of steam before the trader can launch a 'buy' trade as the 'buy' signal appears now for an upward price movement and a 100 pip reversal move in the attempt to capture the 50% Fibonacci to the last downward move.
Point A and B determine the difference between succeeding and failing as a day trader. What happens in the 9 bars between the points A and B depends upon 'money science' and 'robotics.'
Trading is a skill that we are not born with but is learned.
If you know why you must fight then you must learn how to fight!
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