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Hi everyone first post here I have been trading for a little under 2 years and am learning a ton with the BTC. Today I was trading the I dont care size on micro e mini SP. After a strong push down I sold 1 contract after a small pullback, expecting a continuation down to a measured move. Shortly after selling however, I noticed an IOI pattern a wedge pattern and lots of wicks to the downside. When I noticed these changing conditions I then determined the market may be in for a reversal. I exited on a market order rather than waiting to see if the measured move would play out or if my original higher stop loss would have been hit. Just curious what more experienced traders would have done in this situation, thanks!
It would have been better if you added the chart and pointed to the bar numbers you were talking about. In any case, it seems like you were probably talking about somewhere between bars 12-16. If so, keep reading on.
What preceded bar 12-16 was an early morning buy climax which is also an attempted bull BO but ended up forming a parabolic wedge and had a bear breakout. In this case, the bear breakout happened in just a single bar that is bar 8. Bull climax was also a bull surprise, which was followed by a bear surprise.
Bar 8 saw some FT selling in the form of bars 10 and 11. Bull surprise and bear surprise increase the chances of a TR day, and some TR PA. Still, the bear breakout was strong enough to get some more down, perhaps 3 legs down in the form of spike and channel bear.
Whenever you have a climax that fails, and gets BO in the opposite direction, odds increase for a MM based on the size of the climax in the direction of successful BO. See, how price reacted up from the MM based on the morning buy climax.
Since the IOI was after the FT of the bear BO, I would keep holding short betting that the first reversal would be minor. I would need at least some kind of a DB before I think of editing this short or reversing. Doji bars definitely create confusion and lowers the probability for a bear trend, but since it is after a strong bear BO, it does not lower the probability enough for me to warrant any action.
Furthermore, this area of confusion, some eventual strong bull bars and mainly this start of channel down phase becomes magnet for later for the market to test back up.
Abir thank you for the thorough response. I will have to add charts next time I post. You got it exactly, the IOI I was looking at occurred between bars 12-16. Everything you said makes sense, when there is such a strong BO with FT selling holding for measured move would have been the higher probability option betting that any reversal attempt would be minor. Also the beginning of the channel did act like a magnet just like the BTC channel module is teaching. Good stuff, I appreciate your feedback.
Hello David,
Have you watched this webinar? https://www.brookstradingcourse.com/webinars-lectures/trading-price-action-5-thoughts-protective-stops/
It is good, especially the Q&A at the end of the webinar is helpful. Al talks about beginners often get out too early, which is often a trap early in a trend.
Have not seen this yet but I will watch soon, thanks for sharing!
What I think is see often is that Al will get out on a decent bull setup considering the context.
