DislikedGood points. I have noticed the same with news and because I often trade on M1 with tight stops, it really pays to mind the news. Maybe not so much effect, when trading on larger TFs. Also noticed that atleast on M1 trends, fakes seem to occur especially after long & fast runs. The trend/consolidation pattern of a kind I think....Ignored
Yes, these fades/fakes will come along the way...those "short-lived" counter-trend moves. I think they are there for the pigs to get slaughtered. Know the saying right, "Bulls make money. Bears make money. Pigs (those trying to trade every little move) get slaughtered". I think the slaughtering comes because when trading the fades, traders end up in these short/long squeezes that immediately catch them off-guard so they become emotionally flat-footed, and they were not emotionally prepared for that. End result: they are no longer in a position to fight/trade effectively in that moment. Meantime, the market is gone with their money...bye b-y-e.
You mentioned the term "panic reaction"...another trading adage: "Money is made when there is blood in the streets"... (figuratively speaking). When the market move causes traders to panic, warrior traders (the emotionally and mentally nimble ones) make a killing!
I knew someone once who had to take some training to have good defensive driving skills. One day on the freeway someone cut us off, and those skills came in without a second thought and did their part to keep us from the accident. We were spared by maybe an inch, it was that close. We might need emotional pip-reflex training or something . Any ideas anyone? Maybe trading using a playback software at an accelerated speed might help build reflexes, and the emotional training part may just come along with the exercise. Has anyone tried it?
FX4