1 You need experience
2 money management
3 patience
4 you cant predict price, but can increase the odds on your side
It all boil downs to make fast decisions during pressure,and do an assessment of different factors, and being able to put the right amount of weight to each factor, for your final assessment. This is hard, and for you to do a rational judgement also require that your actions are not tainted by any emotions, such as greed, impulsiveness etc. Its like art, or being a good sales man(which i am).
Different factors,with some examples will be given:
1value on different time frames. Price get overvalued/oversold on different time frames. If price is overvalued on the long time horizon, we can expect long term traders, and people in general want to exit their positions. However, if the price simultaneously is oversold in 1 min timeframe, price will most likely still go up even though price is overbought in the longer time frames. Because the 1 time frame, where the price hits the lower or upper bollinger band, in short period of time, will most likely trigger new entrys in the opposite direction or take profit orders. However, if price is oversold in 1 min time frame, and overbought on medium time range, odds increases that price will go even further down in the 1min, where price keep extending below 1min lower band in bollinger band indicator.
2 Major trend. Medium term trend.
3 Where does fear,greed manifest? WHere will people exit their positions,enter etc, or stop loss get hit? Being able to speculate about this,will get you in the trade before price moves. This undoubtetdly require you to have some experience to tell. Anyway, the price move because of orders, so its all about trying to predict what the other participans will do,(in order to profit from the market), this is the mindset you should have, as you trade, you will increase your knowledge of how the market behaves, and can attribute it to fear,greed and other actions by participants. Where does participant think price will head? etc.
For instance, Price increase rapidly. Is this because of new orders or exiting positions? If it is made up of new orders, those orders also have stop losses. Lets say price moves in favour of the new orders, but major trend is down, so there is an impending risk sellers are wating for a good chance to to enter, whenever it thinks price is down. Lets say price goes down, we know that if price reach the stop losses made of the new orders, stop losses will get hit, and price will move even more in the in the direction against the new trades(that is not done by the seller
So how do you know the price is made up of new orders or exiting positions? If price has recently gone in one direction, but now price moves in oppositve direction, its exiting positions. However, if previous movement is ranging, we can assume all exiting positions have been done, or have not been done yet. etc...
If price, has increased rapidly, In a short period time, we know people will take their profit, and there will be people who think the price is ob/os, causing the price to retrace back.
And why does fibonnacchi work? Because a stronger trend means more people are in the market, and therefore, there are MORE take profit orders. But also because of OB/OS, causing new orders in the different direction.
Lets say price is not moving at all but only ranging. Lets say price moves up a bit. then sellers find a good position to enter, and then hitting the stop losses made from the participants driving up the price in the first place. This momentum will be enough for the price to get out of the range for instance, not taking into account other factors.
etc,etc, so that is the mindset you should have, thinking about what other participants are doing.THe more you trade, the more right you will get in your predicitons of the participants, and being able to put the right amount of weight to each factor.
Factor 4:important levels: people will base their decision on this. Many are putting their stop losses here. Zone for attraction, bouncing etc.
Factor 5= news
WHere factor 1,value on different time frames, is about traders going in, going out the market as well, but here we take into acount traders trading in different time frames.
Depending on how strong the upmove is, the stronger the support will be, because the stop losses placed at the important level will be bigger the stronger the upmove, as a stronger upmove means more participants has entered with more stop losses. This is only true, if the particapants are in the market, because if their tp has been hit, they are not in the market anymore.
Where factor 2:trends, is also about what market participants will do, as they also see the trend and will base their decision upon it. You have to weight their favour for down trend, with the traders on short time frame, and other price developments. SO there is a myriad of factors, and you should enter a trade,when you have several factors pointing in one directiion. It can be quite hard to see all important factors, and make an overall judgement during in fast moving market, but that comes with experience. This require that you are 100% rational, fast, and intelligent as you have to come up with a summarization of all factors that stays true to the world, and not faulty because of faulty thinking from your thinking, lets call that common sense, and some intelligence,and experience
So how do you gather experience? Trading short time frames is excellent. Hower, you have to take pauses, to digest all the information. Trading 2 months, and then a pause for a month, to digest everything and muster new motivation. And trading short timeframes make you want to overtrade, so dont fall into that.
2 money management
3 patience
4 you cant predict price, but can increase the odds on your side
It all boil downs to make fast decisions during pressure,and do an assessment of different factors, and being able to put the right amount of weight to each factor, for your final assessment. This is hard, and for you to do a rational judgement also require that your actions are not tainted by any emotions, such as greed, impulsiveness etc. Its like art, or being a good sales man(which i am).
Different factors,with some examples will be given:
1value on different time frames. Price get overvalued/oversold on different time frames. If price is overvalued on the long time horizon, we can expect long term traders, and people in general want to exit their positions. However, if the price simultaneously is oversold in 1 min timeframe, price will most likely still go up even though price is overbought in the longer time frames. Because the 1 time frame, where the price hits the lower or upper bollinger band, in short period of time, will most likely trigger new entrys in the opposite direction or take profit orders. However, if price is oversold in 1 min time frame, and overbought on medium time range, odds increases that price will go even further down in the 1min, where price keep extending below 1min lower band in bollinger band indicator.
2 Major trend. Medium term trend.
3 Where does fear,greed manifest? WHere will people exit their positions,enter etc, or stop loss get hit? Being able to speculate about this,will get you in the trade before price moves. This undoubtetdly require you to have some experience to tell. Anyway, the price move because of orders, so its all about trying to predict what the other participans will do,(in order to profit from the market), this is the mindset you should have, as you trade, you will increase your knowledge of how the market behaves, and can attribute it to fear,greed and other actions by participants. Where does participant think price will head? etc.
For instance, Price increase rapidly. Is this because of new orders or exiting positions? If it is made up of new orders, those orders also have stop losses. Lets say price moves in favour of the new orders, but major trend is down, so there is an impending risk sellers are wating for a good chance to to enter, whenever it thinks price is down. Lets say price goes down, we know that if price reach the stop losses made of the new orders, stop losses will get hit, and price will move even more in the in the direction against the new trades(that is not done by the seller
So how do you know the price is made up of new orders or exiting positions? If price has recently gone in one direction, but now price moves in oppositve direction, its exiting positions. However, if previous movement is ranging, we can assume all exiting positions have been done, or have not been done yet. etc...
If price, has increased rapidly, In a short period time, we know people will take their profit, and there will be people who think the price is ob/os, causing the price to retrace back.
And why does fibonnacchi work? Because a stronger trend means more people are in the market, and therefore, there are MORE take profit orders. But also because of OB/OS, causing new orders in the different direction.
Lets say price is not moving at all but only ranging. Lets say price moves up a bit. then sellers find a good position to enter, and then hitting the stop losses made from the participants driving up the price in the first place. This momentum will be enough for the price to get out of the range for instance, not taking into account other factors.
etc,etc, so that is the mindset you should have, thinking about what other participants are doing.THe more you trade, the more right you will get in your predicitons of the participants, and being able to put the right amount of weight to each factor.
Factor 4:important levels: people will base their decision on this. Many are putting their stop losses here. Zone for attraction, bouncing etc.
Factor 5= news
WHere factor 1,value on different time frames, is about traders going in, going out the market as well, but here we take into acount traders trading in different time frames.
Depending on how strong the upmove is, the stronger the support will be, because the stop losses placed at the important level will be bigger the stronger the upmove, as a stronger upmove means more participants has entered with more stop losses. This is only true, if the particapants are in the market, because if their tp has been hit, they are not in the market anymore.
Where factor 2:trends, is also about what market participants will do, as they also see the trend and will base their decision upon it. You have to weight their favour for down trend, with the traders on short time frame, and other price developments. SO there is a myriad of factors, and you should enter a trade,when you have several factors pointing in one directiion. It can be quite hard to see all important factors, and make an overall judgement during in fast moving market, but that comes with experience. This require that you are 100% rational, fast, and intelligent as you have to come up with a summarization of all factors that stays true to the world, and not faulty because of faulty thinking from your thinking, lets call that common sense, and some intelligence,and experience
So how do you gather experience? Trading short time frames is excellent. Hower, you have to take pauses, to digest all the information. Trading 2 months, and then a pause for a month, to digest everything and muster new motivation. And trading short timeframes make you want to overtrade, so dont fall into that.
That is much safer,than putting weights to factors, and comparing negative to positive etc, because how can you be put a weight on factor? How do you know the weight? If you knew the exact weight, it means you know long term traders, have 1billion in longs, and will exit, whereas short term traders only have a half billion. I mean, you dont know this information, and there is no way you can get it, so you can never put a wait, and you should therefore never really put any weights, because then, you will be gambling. You may get some slight speculation on the weight after much experience, but its still unsafe. What you need is, go with the one way market. But in order to that, you need to know when it happens, which you will only know if you know what your participants are thinking.. And if you know what your participants are thinking, you know what their order will be, tp, sl, and you will know the size of the order and how it will affect price. Orders is the only thing that affect prices. SO you need to have good understanding of what trader think, and how order work.