Description Description Study the ideas presented in Professional Trading Techniques but then prove to yourself that they work. Doing your own analysis, study and research is the fastest way to build confidence in a trading process. Introductions: The mastery of trading is a never-ending pursuit. Knowledge of and confidence in a workable methodology is just a departure point. So, though initial market and trading theory is important, it is not until a trader attempts to put actual technique into actual practice that the real learning begins. All methods begin with the laying down of structure and rules — however, these are ultimately meant to serve as guidelines.
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Sell the first rally after a new low. Afternoon strength or weakness should have follow through the next day. The best trading reversals occur in the morning, not the afternoon. The larger the market gaps, the greater the odds of continuation and a trend. Look for the market to either test and reverse off these points, or push through and show signs of continuation.
The last hour often tells the truth about how strong a trend truly is. As long as a market is having consecutive strong closes, look for up-trend to continue. The up trend is most likely to end when there is a morning rally first, followed by a weak close. High volume on the close implies continuation the next morning in the direction of the last half-hour.
In a strongly trending market, look for resumption of the trend in the last hour. There are four basic principles of price behavior which have held up over time. Confidence that a type of price action is a true principle is what allows a trader to develop a systematic approach.
The following four principles can be modeled and quantified and hold true for all time frames, all markets. The majority of patterns or systems that have a demonstrable edge are based on one of these four enduring principles of price behavior.
Charles Dow was one of the first to touch on them in his writings. In the world of money, which is a world shaped by human behavior, nobody has the foggiest notion of what will happen in the future. Mark that word — Nobody!
Thus the successful trader does not base moves on what supposedly will happen but reacts instead to what does happen.
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