I don't recall who said this… and I'm paraphrasing… but I absolutely loved it when I heard it and it's stuck with me ever since.
"Why shouldn't we try to pick tops and bottoms? That's where the risk is smallest and the profit potential is greatest."
(If you recognise the actual quote can you please provide me with a source so that I can provide appropriate credit! Maybe Sam Seiden… it sounds like something he'd say!)
So yes… I try to pick tops and bottoms.
And that freaks some people out. I know… they send me emails. And they're not always nice!
But the fact remains… the tops and bottoms are definitely where the risk is smallest and the profit potential is greatest. Someone is trading in those areas, selling at the tops and buying at the bottoms. If it's not the retail trader, who typically waits for confirmation, then perhaps it's the professional. Maybe you should be ask yourself how you can see what they're seeing?
Last week we re-explored the concept of confirmation being risk. Real opportunity is found as close to the edges of the market structure as you can get. Where the risk is smallest and the profit potential is greatest.
Is it easy? No. It requires greater skill at reading the sentiment within the price movement.
But is it worth exploring as a means to improving your edge? Absolutely!
This was the trade we examined last week:
See the prior article here if you missed it: http://yourtradingcoach.com/trading-process-and-strategy/confirmation-is-risk/
As mentioned at the end of that article, this session went on to provide some further, very similar, opportunity. So let's explore them today.
Now, it doesn't always work out.
If I'm wrong, the loss is small.
If I'm partially right and price moves only as far as the retail entry, I will usually be able to still work a small profit, whereas the retail entry would have led to a loss.
But when I'm right, the trade gives a much improved R:R when compared with the standard retail entry.
In my experience, waiting for confirmation rarely provides a greater probability trade. But it always provides a worse reward:risk opportunity.
Confirmation is risk!
(Note: As stated at the start of the prior article, this method of entry is not for beginners! This takes a bit more skill and experience. File it away for now… or practice on the sim… if you're not ready for this.)