The Best Odds within a Consolidated Market
Every pattern of the market has precise areas where the probabilities can play in the most favorable way for you, if you trust the pattern (until it expires). Of course, we trust patterns... that's what we do: we drink and trust patterns.
This take of the XRPUSDT pair is a good example of this. As a day trader (or a FTT trader), your hope here would be to catch a meaningful impulse, a long movement of the price that could give you profits. If you want that, where would you place your entry?
The basic knowledge tells about "zones", but all zones are not equally safe and important in every pattern.
For example, we know that the average zone in a consolidated market (the midrange between its resistance and support) is important... but is it safe? Let's think about it:
By definition, an established market that goes sideways is bouncing between its resistance and support zones. It also tends to bounce against the midrange, of course (or, at least, it tends to struggle in that place); but normally you would expect the price to break the middle of the channel in order to reach its margins. Why? Because that's the very nature of the pattern! Duh!
If the price surpass the midrange, the pattern stays vigorous, healthy and reliable. But what happens if the price exceeds markedly the channel's resistance or support? That would be an apparent or definitive breakout of such pattern... its closure: There's no trustable pattern anymore and you must be careful because your previous analysis now belongs to the past.
This reflection is meant to warn you about one of the common mistakes we commit –perhaps because of the nature (a fault?) of our system or because of our unwise decisions–: Not waiting for the price to come up to the best spot for our entry. Not being selective enough when deciding the best settings of the market.
In my series about trading psychology I expect to delve more into this attitude of not caring too much about our best chances, which is a way of not protecting our capital –although there is also a problem in caring too much, to the point of inertia–. But, for now, let's just reflect about the significant disadvantage of placing our bets into forecasts that objectively lack the best odds within a known pattern! Surely those are not the most educated bets we are capable of... and a profitable trader is a person who makes educated bets.
Published from my TradingView blog adleriantrader
Charts courtesy of TradingView | GIF from Giphy
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