Nov 6th, 2010We had a email asking how we use the targets we come up with based on the patterns. There are multiple things that can happen off of a target but one of the most important is that the condition of the market will most likely change.
There are two market conditions. The first is an expansion and the second is when the market is in a contraction. How can knowing the condition ahead of time help you? Multiple ways but the main is so you trade the correct condition meaning; if the market is in a contraction you should not be thinking you will hit a home run type trade on the 3 minute chart. The odds are too high that the market will stay in the contracting condition and it is best to only scalp it for 1-2 points per trade.
How does this help? If you are entering the trade thinking it is going to go up 5-6 points and it only goes u 2 points most likely you will wait for it to come back against you 1 point before you exit and if you take 5 trades you are giving up 5 points of profit because you are trading the wrong condition.
On the other side if the market is expanding and you are taking only 2 points of profit then you are leaving big profits on the table and most likely you will exit and then re-enter again at the top of the wave and the result of this is you give back the profits you just made. There are many more things in regards to market condition we cover in our course.
Looking at the NQ chart we had the 2191.50 as a important upper target and see how once that target was hit the market contracted. This is important to understand before it happens so you can actually trade with the market condition not against it..
Happy Trading,
www.eMiniSchool.com
No comments:
Post a Comment