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Trading - Only Strong Trend Markets Day Trading - Only Strong Trend Days (Can also be used on HTF for investing) There are generally only 2-5 strong trend days a month. The majority of trading days are some form of trading range days, either within a range or a weak channel which reverses and forms a trading range. On strong trend days the market offers what most traders want - a high probability of a large reward, with a tolerable risk. Usually the risk feels greater (and often is) on a strong trend day because there is a sense of urgency, and the bars are often bigger than normal. On trading range days the bars tend to be smaller, offering what appears to be a lower reward, but there are many more failures and reversals. This makes it very difficult to identify a good setup, and even when there is one the market does not make it very far before there is an opposite reversal. This lures unsuspecting traders in, who continue fighting the market taking every trade or only the losers. This type of market is like a boa constrictor. The more you fight, the more you struggle, the tighter its grip and the harder it is to overcome the draw downs and emotional fatigue. Because these types of days are hard to trade and do not offer what I want (a good chance at a large reward), I choose to sit these days out. Instead, I wait for a strong trend day, and then continue to wait some more for a pullback and my edge. Does this mean I miss out on some good moves? Sure. But I do not care. I trade to win, not to trade for fun. It does not matter what I miss, it only matters what I take and the actions I make in the market. So how does a trader know if the day is a trading range day or likely to become a strong trend day and should be traded? In order to help guide you, here are some common characteristics of a trend day. "......" After the above has been identified - it is still better to wait for a pullback and an edge like a "......." This increases the likelihood of a good trade with a strong traders equation. It also helps decrease stress of prices going against the position as it often does when you just enter at the market or without an edge. Of course, waiting is not easy. Just like Tom Petty said "Waiting is the hardest part!" Does this mean you are less likely to lose? Usually, but not always. Even with trend trades fail, although less often. It is absolutely possible to lose money selling in a bear trend or vice versa. The key is to continue onward, and enter the next with trend trade if there is one. If not, or it also fails, prices are more than likely in a trading range and you just haven't yet realized it. If this is the case, it is often better to stop trading and wait for a strong trend day, rather than continuing to fight the market when it is not offering what you expected. **These ideas and strategies can also be applied to higher time frames and long term investing. "..." = withheld material from original post (members only material). If you found this helpful please like! Feel free to comment or ask questions
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by tradersmentality
Day Trading Trend or Trading Range? Can be applied to investingIn the previous article we discussed only trading on strong trend days or strong markets. We also identified what increases the likelihood of a day (or market) becoming a strong trend. As said before, there are only a handful of strong days a month (or only a few strong markets at any given time). Because of this, it is just as important to identify and understand when a market is likely not a trend and more likely a trading range. Within the first hour or two of the open (when day trading), it is often obvious if the day will likely become a trend day or a trading range. Once the market has been identified as likely a trading range, it is unlikely to become a trend day as the market tends to continue what it has been doing. In this case it is more likely to continue to have heavy two sided trading and less likely to convert into a strong and healthy trend. But wait - most channels are some form of trading range right? Yes. This is a form of slanted trading range, or a trending trading range. This is where the market is technically in a trend but it is very weak and likely to reverse at any time. In fact, by the close it will likely reverse and the trend is unlikely to remain intact. Characteristics of a Trading Range Day "............" So if most days are not trend days and are instead some sort of trading range, cant a day trader use this information to his advantage? Of course, if it aligns with your trading style or method. But you must understand that you are not likely to win on many trades, or win a large reward. Instead most trades even strong ones, only go for 1X the risk. On top of that there are many trades to take, most of which fail. This makes it difficult to remain focused and continue trading without emotions and without missing the trades you need to win to recover losses. What about only taking strong trades ".......?" That is a reasonable thing to do, but the probability is still often lower and the reward is as well. And on these days most stop order entries fail, resulting in repeated failures. This is a "............." If not, you will likely get stopped out just before prices go your direction! Or the market will only go in your favor temporarily before stopping you out. This makes trading difficult for beginners and even for those with experience. However most do not realize they should simply remove themselves from the market during these times. Instead they continue to trade as they think they should, and continue to grow losses, making it harder to recover even on a good trading day. "I do not like to trade when the market is likely to reverse at any time. I only like to trade when the market is not likely to reverse at all." - Josh Ridenour **These ideas and strategies can also be applied to higher time frames and even long term investing. "..." = withheld material from original post (members only material). If you found this helpful please like! Feel free to comment or ask questions
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by tradersmentality