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The s&p is among the toughest to trade because of the head fakes you
mention. BUT ... a trader who studies the price action can anticipate many
of these head fakes and exercise the patience required to trade let the
other guys take the jabs. The examples below are taken from my trading notes
on triangles which I just completed over the weekend - the shots are from
daily silver but time frame or commodity doesn't matter because these things
are all over the place. You can see numerous examples of false upside and
downside breakouts along with two patterns which failed and one pattern
which succeeded. The guys in the pits and the big traders don't make any
money if price doesn't move around so they move it in whichever direction
the most orders are to be found. I frequently see triangles like these in
the 2 minute s&p. I watch them punch the price up to trigger the buy stops
and then watch it pull back. It's like a multi-act play and the final act
before the curtain rings down is to suck in all the contracts they can by
clearing the sell stops which means a final run to the bottom before
blowout. I don't buy the breakouts, I buy that (hopefully) final run to the
bottom when the stops are getting cleared. And if the whole breakout fails I
sell the break back through the slope. Takes a line drawing tool and zip
indicators.
Earl
-----Original Message-----
From: BrentinUtahsDixie <brente@xxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Sunday, February 07, 1999 4:54 PM
Subject: Re: The leading edge
>to think of the markets as an over sized game of Simon Says. The market
>makers are always trying to get you to jump in the wrong direction before
>they say; "Simon Says". If they get you to fall for a head fake they have
>done their job and made their money. After writing a huge number of Show Me
>studies to identify every kind of bar, I came to the realization one day
>that trading the markets is like an inexperienced pool player walking into
a
>pool hall one day to play pool with a room full of pool sharks for money.
>The players here(in the markets) have had a very long time to get expert at
>taking you to the cleaners.
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