I was recently having a discussion with a trader who was experiencing a strange feeling as he had just lost another trade.
After the loss became concrete and he had made another donation from his account to the markets, he got angry at losing and entering into a trade he knew he should never have been in.
He began to wonder why he continued making the same sorts of losing trades. He knew as soon as placed and entered that they would lose, but still he played them.
Have you ever wondered about a trade you made and why you made it? Maybe you were annoyed straight after you entered it, and then though damn it's too late and now I have to see the trade through – good or bad!
And… you just keep doing it and keep trading.
Time Frames, Indicators, Strategies and the Moon
The first thing is, over-trading whether on the weekly or one minute time frame and whether using indicators, price action or astrology will kill your account and incredibly fast.
If you have an edge over the market, but instead of only trading those A+ setups you begin over-trading average trade setups, then you need to work out a way that will help you make higher probability setups otherwise your account will eventually go bust.
Q #1: When is the best time to make price action trade setups?
Q #2: And… what is one of the strongest and biggest factors we can put in our favor before we even take a trade?
A: Trading with really obvious trends and making trades in-line with those strong trends – and not trying to ride a trading surfboard against the wave.
These are not only some of the most high probability trade setups, they are some of the most simple because all you have to do is look for price to rotate either back higher or lower into clear value areas and ride price back with the trend.
They can also tend to be a lot higher reward and a lot lower risk.
Check out the super in-depth lesson and video on how to enter price action trades within a trending market.
So… why don’t traders only make trend trades? For a few reasons. Firstly though; some traders do only make trend trades.
They look for bigger reward and lower risk trending setups with trending markets only, but also keep in mind the markets do not trend as much as they range.
Why Do Most Traders Like to Pick Against Trends or Ignore Them? EVEN When They Know They Should Be Doing the Opposite?
Why would a trader watch a clearly trending market fire off a trigger that they would normally enter and not make the trade?
Because they ‘think’ it is too expensive or cheap and the think price has gone to low or too high.
They are waiting for price to do what they think should happen and then they will look for trades.
“What They Think…”
Price may have sold lower 700 pips in the most obvious trend in the history of charting, but for a lot of traders that is far too low and it needs to move higher before they will consider getting into a short trade.
It could be 70 pips or 27 depending on the time frame, the pip number is not important; it is the mindset as I will explain and show you.
Let’s take a look at something else for just a moment that people do the same thing with; the stock and real estate markets – but it could be the price of apples as the mindset is what I am getting at here.
In the stock market people will say “I am not going to buy XXX until it comes much lower into my price range” and whilst everyone else is getting paid their dividends and making profits.
I have attached the S&P 500 stock index chart below to show you an example of this over the last few years of a scenario where price has gone from strength to strength like a lot of individual stocks have whist a lot of people have been waiting for price to turn.
CHART EXAMPLE STOCK INDEX:
Am I saying price will never turn? Of course not and that is not how we make our trades in the market.
I sure as heck am not a fortune of future teller. We wait for the market to play it’s hand and give us our edge and pounce. If we get stopped out – we move on.
But, sitting there and watching opportunity, after opportunity pass by if your edge over the market is in front of you because you ‘think’ something is not going to get you very far.
You need to trade what you see and know – NOT what you think.
I have seen this time and time again first hand with real estate since my grandparents were buying houses at $2,000 they thought were expensive and people today still cannot afford at hundreds of thousands of dollars today, and when these same houses are millions people will be continuing to say the same things.
So What's the Problem?
Most of us know that trend trading is good for us. We also know that we should be having a lot more fruit and veg in a diet and more exercise as well. Raise your hand if you need more of those? A bit higher up the back so I can see you all! 😄
Unfortunately / fortunately we are not trading robots that we can program to do things. This is good because because we sense and read and feel with a subconscious mind, bad for a similar reason in that our emotions trip us up when we don't even know it.
Even when trying to follow their plans traders instinctively revert to their own patterns and behaviors that hurt themselves.
This is the case with trend trading. You have thought a set way about the price of goods like groceries or shoes or buying a car for example in relation to how expensive or cheap they are your whole life, and now you need to stick to trading a simple plan and not listening to news and other information.
This is why some traders have a lot better chance of success. It has very little to do with intelligence. These traders are able to take their strategy and create their edge. Create their plan and just focus on it 100%. Not let outside influence come into it.
They are not trying to be all things at once and they stick to what they are trying to do with consistency.
It can be so confusing…
When you are learning to trade, you are learning to play high probability triggers and especially reversal traders, there is just so much to think about and take on.
You are told to first line up a high probability price action story and then make sure you have a major support and resistance level and never forget that you need to make your reversal trades from the correct swing points…!
So What Ends up Happening? The Sucker Setup
Traders end up getting into what I call the ‘sucker trade’ and it often comes more often than not in a small pin bar or a small candle at the high or low of a market, that looks similar to a pin bar.
And it works perfectly as a sucker setup as it sits there as a tiny looking rejection candle or small pin bar.
If you are not aware or understand how to read the price action story and you only trade triggers you will get pulled into the trap, before the market moves on and runs right over it and your trades stop loss.
The key to this sucker setup and the trap is that traders are entering from a support or resistance level and they are entering from a swing point.
They are however entering from a horrible area. Price is from an extreme high or low – against the whole trend and the only reason price is forming the small candle is to pause and let some profit out of the market so the professionals / big guys can continue.
CHART EXAMPLE – SUCKER SETUP:
Check out the EURUSD daily trade below of the sucker trade / sucker pin bar.
CHART EXAMPLE #1:
CHART EXAMPLE #2:
NOTE: I discuss how the market moves and the key market rotations and rules at: The Price Action Rules to Making a Move
The Important Question is; What Should We be Doing?
Q: How far does price move before we stop trading with the trend?
Do we stop looking for trend trades after price has moved 20 pips, 200 pips, 2,000 pips, 2 million pips? When we just ‘feel’ the market is time to turn around…? When the stars in the Sunday paper tip us off to the moon coming into our sign?
A: Of course the answer is always 20 pips.
Hahaha. Just kidding. 😀
Once the market has shown us it’s hand, one of the silliest things we can do is try and beat our heads against it or think we are smarter than it.
If the market has a clear direction, the path is set and all we have to do is go with it – not against and not think the market is going to change at every moment either which is also just as bad.
We need to trade what is in front of us.
It is no good watching a trend make moves for months on end saying you are waiting for a reversal so that you can get into the next trend, meanwhile you are watching price moving right in front of you either higher or lower and you want do anything because you ‘THINK’ something else!
Sometimes after these major moves like these on the higher time stop and turn, they do not go back to trending for months and you will have missed these occasions and opportunities.
The simplest way to trade a trend is = what is right in front of you now. NOT what you think could, will or may happen.
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