I get a lot of questions from students about which way the markets are likely to go. Looking at my market update article from August, I had observed a head and shoulders bearish reversal pattern that did not look strong. As we enter October, we can see that the pattern did indeed fail since it was not at a strong supply zone from a larger time frame.
When price broke the neckline, it did pierce the demand zone below but then reversed. I am now watching to see if a higher low is made and should a higher high follow, the bullish trend should continue.
The problem lies in trying to trade in longer timeframes when the markets are potentially changing trend direction. When you are not certain of the market direction, it is best to wait and not put your capital at risk. You could also drop down to smaller timeframes where a trend can be observed and joined with higher probability.
You have to remember that as a trader, deciding not to trade is also a trading decision. We are all too eager to jump into positions just because we feel we “have to trade.” The truth is that we must remain patient and protect our money. We should only enter positions when we have found a trade opportunity that offers low risk, high profit potential, and also a high probability that the trade will work.
Online Trading Academy students know that the truth to where price is going to move is on price itself. Use what you have learned in your classes as well as in the Extended Learning Tracks to improve your trading performance. And above all, protect your money. If you lose it, what will you trade with?