I think a lot about trading. It is habitual from the many hours a day I spend trading. The other day I thought of another way to try to explain why I trade differently than most other traders.
If you know anything about American Football, then you know each team has to advance the ball at least 10 yards in 4 attempts. Each time they do, they get a new 4 attempts, or downs. If they are close to the goal posts they can kick the football in between them for 3 points. Otherwise, they must reach the end of the field and score a touchdown for 6 points.
Imagine you go to see a game. You keep track of how the play happens. Team A gets the ball, makes 3 downs and has to kick it away. Team B then advances close enough to score a field goal in 7 downs. Team A then has the ball and also ends up scoring a field goal in 11 downs. Team B then has the ball and scores a touchdown in 9 downs. Team A then has the ball and kicks it away after 3 downs. Team B then scores a touchdown in 3 downs. Get the point? Unpredictable. There is no way to know how far a team can advance the ball based on their field position.
Now it is the next week and you are going to another game. You have a record of what happened last week. Will you bet the same actions happen again? Same downs? Same score?
Yet, you don't have a problem with connecting previous trades together and assuming that since price stopped at a certain point last week, then it will stop there again this week. That is the fallacy of support/resistance. You have no idea if Team A will go 3 downs and kick, or 11 downs and score, but, suddenly, on a trading graph, you know what will happen.
Not trying to insult anyone. This is just how I view that trading style. I do not think it is a good method. It is my opinion based on history not repeating itself. The names of the traders, the number of lots, and the reasons for entry/exit have all changed since the last trade. It is not the same trade, so why would it do the same thing?
I measure the difference between the buyers and the sellers. To me, it makes more sense to follow them. I do this by averaging averages. I measure short-term buyers/sellers against long-term buyers/sellers. Whichever side of the equation has more, I join. I join after they equalize so that I can gain the most distance between the entry and the exit.
I hope this helps explain my thought process better. Good Luck.
If you know anything about American Football, then you know each team has to advance the ball at least 10 yards in 4 attempts. Each time they do, they get a new 4 attempts, or downs. If they are close to the goal posts they can kick the football in between them for 3 points. Otherwise, they must reach the end of the field and score a touchdown for 6 points.
Imagine you go to see a game. You keep track of how the play happens. Team A gets the ball, makes 3 downs and has to kick it away. Team B then advances close enough to score a field goal in 7 downs. Team A then has the ball and also ends up scoring a field goal in 11 downs. Team B then has the ball and scores a touchdown in 9 downs. Team A then has the ball and kicks it away after 3 downs. Team B then scores a touchdown in 3 downs. Get the point? Unpredictable. There is no way to know how far a team can advance the ball based on their field position.
Now it is the next week and you are going to another game. You have a record of what happened last week. Will you bet the same actions happen again? Same downs? Same score?
Yet, you don't have a problem with connecting previous trades together and assuming that since price stopped at a certain point last week, then it will stop there again this week. That is the fallacy of support/resistance. You have no idea if Team A will go 3 downs and kick, or 11 downs and score, but, suddenly, on a trading graph, you know what will happen.
Not trying to insult anyone. This is just how I view that trading style. I do not think it is a good method. It is my opinion based on history not repeating itself. The names of the traders, the number of lots, and the reasons for entry/exit have all changed since the last trade. It is not the same trade, so why would it do the same thing?
I measure the difference between the buyers and the sellers. To me, it makes more sense to follow them. I do this by averaging averages. I measure short-term buyers/sellers against long-term buyers/sellers. Whichever side of the equation has more, I join. I join after they equalize so that I can gain the most distance between the entry and the exit.
I hope this helps explain my thought process better. Good Luck.
You cannot be extraordinary by being normal
5