Have you ever heard this quote, ” You don’t trade the markets, you trade your beliefs. ”
MY TRADING PHILOSOPHY:-
“In a news free environment, market reverses at a price level that causes a supply/demand imbalance. It travels in the new direction until it hits a level that cause a supply/demand balance again. “
The reversal can be that of a swing or a trend. That depends on how strong the level is and how weak trend is.
I know defining a good bias is easier said than done in real time, But it is simple and gets better and better with experience. Once you identify the trend structure and the strength of the trend, everything is pretty straight forward.
Once that bias is identified, I relax and watch the price action to see whether the newly added candles are supporting bias or there need to update anything about the trend structure and bias. I don’t do anything until a counter bias move starts. Why?? Because I want to snatch the money from those traders who are fighting the high probable bias, when they realize that they are wrong. So I want them to take a position before I take a position. Also I would like to benefit from those traders who try to enter late into the swing . These two groups of traders gives my bread and butter.
Here it comes. How long will I wait when market is moving against my bias?
What does the philosophy say? Market reverses it’s direction when it hits a level that can cause some supply/demand imbalance. So I wait until market reaches the level that can cause some supply/demand imbalance. The level can be HTF S/R while looking for a reversal, or it can be minor S/R or trap level from LTF while looking for a with trend trade, or a range boundary when market is ranging. During that waiting, I also make sure that the trend structure in TTF remains intact. Change of trend structure, changes the bias and also changes the tactics. Without any doubt, I am a contrarian.
We don’t know whether the market respects the level that we are looking at or not. That’s the reason why I don’t place blind limit orders.The price interaction with the level will let us know whether it’s time to give an entry or wait for some more time,
Does that mean the reversals always happen at the HTF S/R, and the pulbacks always end at LTF levels?
Definitely no. There is no statement that has the word ‘always’ in the markets. If someone uses that, he/she must be lying. It’s not about what it should do and what it shouldn’t do. It’s all about where the odds will be in favor and risk will be less.
If you need only odds, go with the breakouts. But the risk will be huge.
If you need lesser risk, trade with the blind limit orders at good levels with a volatility based stop. But the odds will be less.
Trading is all about balancing these two. Nothing else. Both the above methods will not suit my personality. So I wait until price reaches the level, gives a price level to hide the stop and then fire the entry as close to that stop as possible. Stop always comes before the entry. (I used always here. But it’s not a lie.. )
What if the market reverses in air without reaching my level?
Who cares!!! Let it do whatever it wants. Move onto the next opportunity. We need not trade each and every swing. Just update the trend structure and bias if that is needed and then wait for another counter bias move to start.
But the positive thing about sticking to the SD(supply/demand) levels is, historic charts prove that most of the big moves start at good levels irrespective of the timeframe. I am sticking to those good levels, so I don’t miss much of them unless I hesitate and miss an entry when the setup builds up or when the exit is early out of some emotions. Missing out of hesitation and early exits happen when we slip out of zone trying to catch every 5 or 10 tick movement or because of the fear of missing out and stuff.
During Entry:-
Once everything in the pre trade analysis are in place, entry will be on the rejection from that level. It can be TST or BOF of that level. I don’t want to talk about that in this article as this one is not about entries and exits. I will skip this to the future articles as well.
While setting the targets:-
This one doesn’t need much explanation. Expectation is that the market move atleast to the next SD level once it reverses. That is where I like to take half of the profits,manage the second half when market is piercing the levels on it’s way in the direction of the trade.
There will be times, where I don’t exit the first half with a strict order at the immediate level, when the move has a lot of potential. I don’t recommend this to the beginners as it needs some experience to take exit decisions when market is printing candles at the right edge.
While managing the trade:-
Use the levels within the swing you are trading, that are formed by the market when it is moving towards the targets, to trail the stop. I don’t trail the stop if there is no level to support it unless I want to scratch the trade or don’t want to take a loss anymore or I want to manage the trade very aggressively.
This is what I meant when I said that the trading philosophy comes in everything I do in trading. It might look simple, but let me admit it honestly, finding a single statement as simple as this that encapsulates everything in trading, and preparing a trade plan that is consistent with that one statement from the scratch is not as easy as it appears.
In spite of all these, market has the potential to surprise and that is when you have to take precautions like decreasing the position size, or moving back to SIM or totally moving your ass out of the computer Whatever it takes, make sure you are financially and psychologically ready for the opportunities that will come when the markets start to behave the way you can understand. Keeping a philosophy like this and reminding yourself about it often while trading tells you whether the market is conveying it’s information in your language or not. The moment you realize it is not your language, the best thing is to stay flat. Saying flat is also a position in trading.
MY TRADING PHILOSOPHY:-
“In a news free environment, market reverses at a price level that causes a supply/demand imbalance. It travels in the new direction until it hits a level that cause a supply/demand balance again. “
The reversal can be that of a swing or a trend. That depends on how strong the level is and how weak trend is.
I know defining a good bias is easier said than done in real time, But it is simple and gets better and better with experience. Once you identify the trend structure and the strength of the trend, everything is pretty straight forward.
Once that bias is identified, I relax and watch the price action to see whether the newly added candles are supporting bias or there need to update anything about the trend structure and bias. I don’t do anything until a counter bias move starts. Why?? Because I want to snatch the money from those traders who are fighting the high probable bias, when they realize that they are wrong. So I want them to take a position before I take a position. Also I would like to benefit from those traders who try to enter late into the swing . These two groups of traders gives my bread and butter.
Here it comes. How long will I wait when market is moving against my bias?
What does the philosophy say? Market reverses it’s direction when it hits a level that can cause some supply/demand imbalance. So I wait until market reaches the level that can cause some supply/demand imbalance. The level can be HTF S/R while looking for a reversal, or it can be minor S/R or trap level from LTF while looking for a with trend trade, or a range boundary when market is ranging. During that waiting, I also make sure that the trend structure in TTF remains intact. Change of trend structure, changes the bias and also changes the tactics. Without any doubt, I am a contrarian.
We don’t know whether the market respects the level that we are looking at or not. That’s the reason why I don’t place blind limit orders.The price interaction with the level will let us know whether it’s time to give an entry or wait for some more time,
Does that mean the reversals always happen at the HTF S/R, and the pulbacks always end at LTF levels?
Definitely no. There is no statement that has the word ‘always’ in the markets. If someone uses that, he/she must be lying. It’s not about what it should do and what it shouldn’t do. It’s all about where the odds will be in favor and risk will be less.
If you need only odds, go with the breakouts. But the risk will be huge.
If you need lesser risk, trade with the blind limit orders at good levels with a volatility based stop. But the odds will be less.
Trading is all about balancing these two. Nothing else. Both the above methods will not suit my personality. So I wait until price reaches the level, gives a price level to hide the stop and then fire the entry as close to that stop as possible. Stop always comes before the entry. (I used always here. But it’s not a lie.. )
What if the market reverses in air without reaching my level?
Who cares!!! Let it do whatever it wants. Move onto the next opportunity. We need not trade each and every swing. Just update the trend structure and bias if that is needed and then wait for another counter bias move to start.
But the positive thing about sticking to the SD(supply/demand) levels is, historic charts prove that most of the big moves start at good levels irrespective of the timeframe. I am sticking to those good levels, so I don’t miss much of them unless I hesitate and miss an entry when the setup builds up or when the exit is early out of some emotions. Missing out of hesitation and early exits happen when we slip out of zone trying to catch every 5 or 10 tick movement or because of the fear of missing out and stuff.
During Entry:-
Once everything in the pre trade analysis are in place, entry will be on the rejection from that level. It can be TST or BOF of that level. I don’t want to talk about that in this article as this one is not about entries and exits. I will skip this to the future articles as well.
While setting the targets:-
This one doesn’t need much explanation. Expectation is that the market move atleast to the next SD level once it reverses. That is where I like to take half of the profits,manage the second half when market is piercing the levels on it’s way in the direction of the trade.
There will be times, where I don’t exit the first half with a strict order at the immediate level, when the move has a lot of potential. I don’t recommend this to the beginners as it needs some experience to take exit decisions when market is printing candles at the right edge.
While managing the trade:-
Use the levels within the swing you are trading, that are formed by the market when it is moving towards the targets, to trail the stop. I don’t trail the stop if there is no level to support it unless I want to scratch the trade or don’t want to take a loss anymore or I want to manage the trade very aggressively.
This is what I meant when I said that the trading philosophy comes in everything I do in trading. It might look simple, but let me admit it honestly, finding a single statement as simple as this that encapsulates everything in trading, and preparing a trade plan that is consistent with that one statement from the scratch is not as easy as it appears.
In spite of all these, market has the potential to surprise and that is when you have to take precautions like decreasing the position size, or moving back to SIM or totally moving your ass out of the computer Whatever it takes, make sure you are financially and psychologically ready for the opportunities that will come when the markets start to behave the way you can understand. Keeping a philosophy like this and reminding yourself about it often while trading tells you whether the market is conveying it’s information in your language or not. The moment you realize it is not your language, the best thing is to stay flat. Saying flat is also a position in trading.
