We are all aware as traders that there are only 3 ways the price on a chart can move , up ,down or sideways.
So how do we know as traders which way the price is going to move (note future tense) .
The real truth is that we dont. All we can do as traders is make best use of the tools we have to trade what is going to happen now or in the future using events that have happened in the past.
Lets take a look at a chart with a simple trend line on it and nothing else.
audusd trendline
You can see from the chart that the trendline has hit its pre required 3 points to form a trendline so there are now probably thousands of traders in the world prepping to go short at the next touch of the trendline.
Well here is what happened :
audusd failed
So what the heck happened there then ?
In basic terms the price paid absolutely no attention to that trendline at all , the pack mentality was to go short however the market had different ideas.
The reality is that us as retail traders have a zero to minicsule effect on the direction a chart moves in , so that tells us as traders, as we are not in a position to move the price that we have to go with the price and not try to pick a top or a bottom as happened here.
Conspiracy theorists here will also comment that the banks knew where our entries were and our stops and took them out. Whether or not that is true , one thing is for sure , its not just the banks that knew our entries and stops but the whole world too . ( it isnt really that hard to see )
Check over your charts ad see how many times that lovely looking trendline, or support / resistance zone failed.
There will be examples everywhere.
One of the methods we use here is Price Action trading which is in essence letting the price show us first which way it is headed.
Not only do we have our entry very obviously defined for us but the stop loss position is too. Your stop loss position is actually extremely important as part of your strategy , just trading off a trendline actually does not give us a logical place for the stop to go .
Dont trade blindly let the price show you first where it is headed !
