The Dow Now
We have a confirmed momentum change in the Dow Jones Industrials Index. Now I am looking for shorts. Notice how the price action reacts when it reaches the support and resistance levels on the chart. It has touched a major support area, and bouced up to a previous support (8500) which now serves as resistance. And look, it sold off slightly. On this chart, it looks small, but when you are trading a 5 minute chart, there can be a very significant move there. So the question is, when to short? Well it is a tough area here. I want to see how price reacts in this resistance area of 8500. If weakness continues and we do not break clearly above 8500, then I will look to buy some index options (puts). We will be talking about this in the chat room. So if you want to see how I make my decision in real time, join us in the room!
In the earlier stages of my learning curve, one serious problem that I would have to deal with was forced trading. This is when you trade because a setup ALMOST looks right, or trading a valid setup during rangebound momentumless market. As you may or may not know, forced trading does not lead to positive returns. This takes time to overcome. One way to help is have a hand written version of your entry criteria in front of you while trading. This will help you stay focussed and not take setups that don’t meet your criteria. Sometimes you will miss some market moves but just remember, this kind of discipline will also prevent many erroneous trades. If you are upset about missing a move here or there, then you are being greedy. The market has a way of removing those kind of people from the game. Another solution to this problem of forced trades is to find a mentor, or someone with alot more experience who can help you recognize the kind of market conditions where you should even be thinking about trading. We offer this kind of coaching in the chat room.
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We have a clear momentum change in the Dow Jones Industrials Index and now looking for shorting opportunities. One thing you want to learn to avoid are forced trades. You must be disciplined and keep you emotions under control. Check out our chat room because we cover these topics in much greater detail and its in real time. Join us, it is free. See you in the room!