Many inexperienced traders who read my reports often think my evaluation is also a reflection of my trading decisions which is not the case at all. The market may show signs of short term bearishness, but that is the market, and only serves as a consideration for strategy and risk management. If I was day trading these markets, then I would be much more sensitive to immediate fluctuations. I am building a position trade which means I am looking at the market from a much broader perspective.
I often remind newer traders that before you evaluate a market, you must have an idea of what time horizon you want to trade because information is weighted differently for each time frame. For my position trade, I am looking at broader market structures and evaluating price action on larger time frame charts such as 12 Hour, daily and weekly.
And at the moment, price action has gotten stuck just under an important resistance point. A decisive break of 8427 is a key indicator for the return of momentum on the bigger picture. It acts as a confirmation that the most recent swing is over. So what does it mean if the level doesn't break? It means possibilities are more likely.
What possibilities? A pull back to the 7Ks for a possible higher low formation. or a retest of the 6K low. In fact, the lower boundary of the current 8171 to 4983 (.618 area of entire structure) implies that a test of the 5Ks is possible for a failed low scenario.
How do you manage a position IF a move unfolds? For me, I will not add any more to my long. Only in an extreme instance if price spikes off of a slight lower low will I consider buying more. Otherwise, risk can be managed by staying flat and waiting for more signals. Once again, what to avoid on this time frame is getting short, because chances of a fake out are high based on the location of this price action.
In summary, having a perspective serves as a guide. Risk management and strategy must be shaped and adjusted as the perspective changes. Your perspective must start from a time horizon and that is what should determine how your information is weighted. This is what allows me to be long and not get shaken in a market that has been on the short term. Short term direction changes frequently, but the bigger picture does not. The fact that this market is trading within a major is a key factor in my perspective and I am not about to become at a low. As the market offers information that is in line with MY outlook, I can take initiative like add to my position. On the other hand, if the market offers information not inline with my outlook, I have to take defensive measures like not adding, possibly lightening up, and waiting. In order for this to work, my outlook must be based on a fundamental premise and in this case it is about the economic role of this market in the future. This is a major difference from day trading, which does not consider long term viability and focuses only on signals at the moment. Do not confuse perspectives. The simplest thing you can do is choose one and learn what is relevant to that time horizon and what is not. That alone will put you on a much more stable path when it comes to strategy and decision making in these markets.
Questions and comments welcome.
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