Thinking through scenarios: anticipation instead of reaction
The market moved fast into the TL, implying that it would reverse and it did. It makes an equally fast move back up to the gap close – also indicating that it will most likely reverse.
This is NOT trending action – it is fast, tradeable ranging PA. It has all the signs: it’s respecting levels; the 169 is running through the middle of the PA and new highs and lows are being sold and bought.
The pull back from the move up to the confluence around the close forms a perfect corrective channel for the Imp-Corr structure. It is is a valid long and if it the level above breaks, and has legs, the market will have switched from ranging to trending. If it does this, I want to be long before it happens.
It does break but then makes a new high and then a new low. Again, these are all signs that the market is not trending and the best strategies are fades and retests. But what’s important here is to buy or sell value.
You can that 169 breaks work, but why would I want to enter a trade at those levels with all the the KLS within a 25pt range – there’s no edge. Buying and selling value means that I enter trades at extremes where there is greater probability of a TP being reached. If I do that and it trends, I will be stopped out, but that is tradimg.
Speed of the move into 11200 shouts ‘short’But unless I think in scenarios, all of this will take me by surprise and that will result in crappy, reactive entries. My thinking needs to antcipate – for example: where will it test next? What could happens after this Imp-Corr structure? What would have to happen for the PA to be trending instead of ranging? Where’s it’s next target and so on and so on – draw my ideas out and see what possible trades will set up. That is the way to get the best entries and the most relaxing trading – to minimise the chances of being caught unwares.