I’m putting my conclusion at the top of this post since I know at least some of you won’t make it to the end. It’s a simple bit of advice from someone (me) who has made every dumbass trade that can be conceived of at least 100 times in my long trading career. Here’s the advice: stop making dumb trades! Stop trying to scalp or make short term trades off a 1-30 minute chart. Stop making trades without a specific plan of where you’d enter, exit, or stop out of that trade! If you don’t want to use a stop then make the trade size so small that even if you lose the entire amount of that trade it is an inconsequential percent of your trading capital. Stop risking too much capital using strategies that I present here but altering them so that they’re not really the same trade as I demonstrated. You absolutely should try to improve on my trades and chart analysis but test it out on paper trades or really small size trades where you’ll be learning from the process instead of stressing out over a potentially big loss. Patience and discipline are the 2 most important qualities of a successful trader so practice those until you’ve reached the next level in trading!
Below is a post from X where I showed a target price and date for a continued move lower in SPX. It has some Fibonacci lines on it and a projection of where price should go if this projection is correct. It’s a projection, not a prediction! What’s the difference? A projection is based on historical comparisons and known levels where algorithmic buying and selling will interact with the market. It forms the basis of a trading plan.
Here’s the chart from that post.
A prediction involves ego and once ego becomes involved in any process it typically overrides rational thinking. It causes traders to double down (or worse) on a trade gone wrong. Those traders will often search social media for opinions that confirm their prediction and ignore those that contradict it. That is the exact opposite of what that process should be! Better yet, if I make a trade based on a projection then I should be identifying where that projection breaks down and exit any trade that doesn’t follow the path I expected. For example, in the chart above, if SPX rallies above either the 50%-61.8% Fib retracement of the decline from the March 25 high or the Fib resistance zone of the most current daily candle then this projection is not playing out as I expected. That means the plan changes so my strategy changes! Simple if there’s no ego involved. Extremely hard if there is. I don’t care about being right, I care about being profitable!
Below is a X post describing a trade that would potentially allow me to profit from the projected move shown on that SPX chart above.
And the X post below describing how, in just a few hours, that trade had a 45% return on risk.
And this post where the value of that Put Diagonal had risen from $3.35 to $8.85.
And now the current risk profile showing that same 200-point wide Put Diagonal being worth $12.50. On this risk profile I’m simulating how, if the original trade was for a 2-lot, I could sell 1 of those 2 which would lock in a minimum $580 profit while still maintaining the potential of another $20,000+ profit. All that from an original $670 of risk.
Next X post was regarding the BABA weekly chart. The Jaded Lizard replied to my post and offered a good analysis and potential trade structure based on the price analysis.
Here is the chart from that post.
This is the same weekly chart with a little added nuance. The current week’s candle which is complete was not able to rally up to the Fib retracement resistance zone of last week’s range. That would’ve been good location for a short trade but buyers were apparently not motivated enough to advance price. That is clearly an indication of weak demand which adds to my bearish bias based on this weekly chart.
And finally, a look at the BABA daily chart with the 3SMA bands. Clearly price has been moving sideways for the past 20+ days. That could be considered a bullish consolidation. It’s easy to see that very important support if that is a bullish consolidation is 128. That is where buyers stepped in back on Feb 24 and is also the 61.8% Fib support of the Mar 4 Doji candle that didn’t find price acceptance below 128. I would be good with shorting a breakdown (even though I’d much rather short a move up into resistance) below 128 but I would not hold that trade if price closed back above 128. Price should also not close above the 3SMA upper band if sellers have the upper hand.
That’s all of the charts that I’m going to cover in this post. It’s takes a bit of time analyzing the price action of a single instrument in order to develop a trade plan, doesn’t it? On the potential BABA trade I’ve identified an entry level, a target area for the trade structure from the weekly chart and a stop level. That’s a complete trading plan. Anything less than that is just gambling on an outcome which will likely result in a loss. Have you ever wondered how I can be a relatively active trader and still find time to have multiple (many) posts on X featuring annotated charts and risk profiles during the trading day? It’s because I went into the day with a plan in place and much of the time is spent waiting for price to hit a key level in order to trigger that plan. Key word: waiting! Not jumping in and out of short term chop trades. Waiting. I hope I’ve made my point.
As always, questions and comments are welcome down below!
Wonderful post!
Appreciate the comment, I hope it helps!