When The Best Trading Setups Fail And What To Do
I got a lot of emails and DM's from traders asking me my thoughts on where the market is going to go from here, what's my price target?
The truth is, I don't look at markets that way. When I got long $NQ Futures back at around the beginning of April, I wasn't planning to be on the doorstep of 10,000 NQ by summer.
And to be clear, this is not a victory lap of me catching the bottom and piling in long from the very bottom and buying a Lamborghini. Nor was this a VBO or FVBO trade, this was me applying my knowledge of price action and how it (price) behaves in different market regimes.
Me getting long on April 5th was not expected to be a 2000+ point winner (updated to 5,000 point winner), with multiple adds to my positions. I had no special perspective on where I thought the market was going to go and I certainly didn't expect to be putting in new highs with all that is happening in the world.
All that is happening in the world and what we were dealing with on April 5th had nothing to do with my decision to get long. The news had 0% to do with any of my decision, the recency bias of what just happened in March had 0% to do with my decision to get long.
And this comes back to how I do all my trading, let me walk you through what my decision-making process was at the time and how it adapted as we went higher.
At the end of March there were a couple of things on my mind, first was the Bull Volatile market regime that we had just RAPIDLY departed from a month ago.
A Bull Volatile market regime is REQUIRED for a major market top, among other things. So that signaled a lot of credibility to the fact that the April bottom formation might just be a tradable counter-trend bounce before we head lower. To be clear, I wasn't a perma-bull when I put this trade on, but I do know the market is built, by design, to go higher in price over time.
Next, I annotated the complex double bottom pattern that I did not trade. I missed the bottom, yes I suck and you should tell everyone you know that I suck!
Actually, even though there was a tradable setup the risk parameters were too high for me to trade even 1 contract. So had I even wanted to buy, my risk management wouldn't have allowed it.
None the less, at this point I was queued up to look for reasons and ways to get long.
Once the price action confirms the market regime we are in, we can apply the correct strategies to take advantage of the environment.
For me, I was more than happy to continue to add to my long position, almost lazily, as each of the most obvious market top short setups, FAILED.
It's rare that I do step away from my FVBO/VBO strategy and take a more discretionary trade but when I do this is the sort of outcome I'm after.
I don't know when this trade will end, but I'm holding long and will continue to add when the setups present themself.
This was from an email I sent out to subscribers on June 7th, 2020, as of September, we are still long this trade. If you want to learn more about this and get these types of updates Subscribe to the email list, it's FREE!
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