I want to write a short followup to last week's article – First Pullback After Significant Structural Change.
Email feedback during the week made it clear to me that some information which I'd assumed was obvious, was not actually obvious to all readers.
And as with most assumptions, it's actually INCREDIBLY IMPORTANT.
The article dealt with a trade taken well after my usual "stop trading" time of 12:00ET. This is normally time for my post-trading routines before heading off to bed.
But on this day I wasn't tired, so I went on with other work while keeping one eye on the markets. Not with any real intent to trade. Just to follow along. Unless of course an A+ trade opportunity came along, screaming out to be traded, and then it's game on.
So here's what happened (from a higher timeframe chart perspective)…
If you want to see the trade, check out the original article – First Pullback After Significant Structural Change.
So this led to a reader asking why I didn't trade LONG from the obvious level of support?
My error last week was in approaching the trade and surrounding context purely from the technical charting perspective.
1. Obvious structure.
2. Break from obvious structure.
3. Trade the first pullback.
I didn't sufficiently explain the underlying reason WHY I consider this an A+ opportunity. And why opportunity LONG from the obvious level of support was something I was happy to pass on.
An excerpt from my response:
I think the cause of the misunderstanding here is that you're failing to appreciate how little I wanted to be trading. My trading was over. I had almost zero interest in trading. I had better things to be doing. UNLESS something absolutely amazing set up.
So yes, had I been trading from 12:00 I would have been seeking entry LONG, as you've suggested. Price held that level nicely.
But this is not the kind of action I want to take after a trading session is over. Can you see the difference between the two sequences? The sequence from 12:00 to 15:00 is just a continuation of the earlier session bias. But the move after support was broken is different. Suddenly A WHOLE LOT of traders are wrong. Everyone who is still holding a longer-term long position, established at any time in the last 3 hours, is suddenly in a drawdown. This is the kind of action I want to trade. Something that traps a whole lot of people. Something that shocks the market. Otherwise, I'll pass.
The break of support is something which SHOCKS the market.
Something that results in a massive increase in emotion.
Viewing charts from the perspective and emotion of "the other trader" is the key premise underlying my whole trading approach in the YTC Price Action Trader. Outlined in Chapter Two and then evident in the whole analysis and trade process.
The same applies with every trade you see within my newsletter and blog posts. Even, as in the case of last week's article, where the discussion focused solely on the technical aspects of charting. Look to my charts from the perspective of "the other trader". It will be there somewhere.