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Today we’re going to proceed with where we left off in the last episode. I showed you how the markets are manipulated to break a support line in order to have you scared out of your position. How the market at that point promptly inverts and begins a new trend in the opposite direction – i.e. in the direction that you and many traders thought the market would go – but everyone got scared out out their positions when the market broke the support line.
This is what Wyckoff traders would call a spring! The market is squeezed together like a spring, and when the tension is released the market shoots right up – just like a spring would do.
I have heard some really experienced price action day traders state that trading these springs is probably the most ideal approaches to trade the markets using price action only. What’s more, I certainly concur, and if you look at the chart I surmise you can perceive the reason why. After the market has gotten through the support, if you look at the chart
Shockingly, it is extremely hard to trade these setups live, on the grounds that it conflicts with all that you have learned about the markets and what’s supposed to happen when the markets break a support line – you will think that the market will descend. So it additionally conflicts with your emotions, beliefs and rationale.
So my recommendation for how you can approach this instead is to let the spring and the subsequent market action run its course – let the market break the low, let it reverse and start moving upwards. Don’t rush into things. Wait for the first pullback. That is when you should enter your position.
In the event that this pullback holds above the previous low, the spring – at that point it will be a great time to enter your position. In the event that the pullback is on lower volume and smaller candles than the up move then, just like we discussed previously, then that is a very good indication that the line of least resistance is UP – and you can go long!
So, let the market break the low, wait for it to move upwards, wait for the next pullback and enter your position.
You can likewise have the opposite situation for a short trade. Wait for the market to break the high, let it reverse and move down. Wait for the bear rally on lower volume and smaller candles and enter your trade. The bear rally should not reach as far down as the initial upthrust.
So that’s it. That a good price action day trading strategy. It is difficult to trade the spring or the upthrust, anyway if you wait for the principle move and the pullback, by then it ends up being much easier to trade this.
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Until the next time, good trading!