There rules to the retrace…
We understand that each level is determined by the time it takes the market maker to consolidate away from a high, hit the 50 and return back up.
We also understand that price can pull back to the 13 ema consolidate for a short period and continue back up.
I will say it again…trading is a game of variance….the more you trade, the more you will see what works and what doesn’t.
The problem is, the new trader will take the hybrid system and assume that it will deliver each time….that is not the case…
However the hybrid system gives you the ability to know what will work and what won’t.
See it like this….the image above….we can see price is pulling back and csme down to the 13 ema and bounced away from it.
Does this mean you go long? No…why?
It’s not enough…
You have to factor the following.
1). Has price tried to close below the 5ema aggressively?
2). Where are we coming from?
3). What are the smaller time frames showing us? Vectors? Stopping volume?
4). Rsi? Outside the Volatility bands? Is it within?
5). Time…what time zone are we making out decisions on…weekend or week day.
6). Cycles…if the W has shown strength, are we anticipating a level one on the 1hr? What about the higher time frame levels?
You can see from the above, there are a number of factors that you can base your entry on…
But ultimately, it’s down to whether you take the trade on confluences 1-3 or any order that is showing signs from the criteria above.
My goal is to get you to try and understand that the market does not provide us a guaranteed way to exploit price.
However our edge is massive, and we have to be OK with instances that may not play out…
We will never know what risk we should allocate when we come to taking a position. That’s the nature of trading.
However, of we train our eyes to understand the way price behaves…you can bet that the behavior you see bitcoin doing now…was exactly the same as before.
It’s not an easy game to play, trading will challenge you.
The one thing that separates the traders who last in this game IS they understand they have no control of what can happen next.
They do however understand that there are dynamics in the way price moves, that if you pay close attention, you can work out if they are going to repeat that same behavior.
I hope this helps guys.