I love this comment from David on last week’s article – Long is Wrong 2. The key part is highlighted.
I’m actually really excited to see someone recognise the importance of watching for failure scenarios.
Opportunity exists at the places where large numbers of traders get something wrong.
The times and places where obvious expectations fail.
The most common example being breakouts of OBVIOUS higher timeframe structural features (levels or patterns).
Let’s look at an example from last Friday – a clear and obvious break of a key overnight level – which fails right on the market open.
This was ONE AND DONE for me. It’s late in what has been a long and challenging week. And approaching 1:00am my time.
Thankfully, the market offered an opening move which was smooth and one directional.
When there is a clear and obvious change in the structure, make sure you consider and visualise multiple scenarios. The break may hold. And opportunity may be present in the breakout direction. But consider the failure scenario as well. Assess the structure and ask whether or not a higher timeframe structural trap could provide even better opportunity.
Because if it can, you want to be ready for it. The entry can come quickly. And may not give a second chance.