The most challenging problem in trading - as the title say, its the most complex problem which a trade may face which is the obstacle in the success.
Its the undefined breakout and its a really problematic subject to study for those who are interested in reversal trading. Well people may advise many to avoid reversal trading but in reality reversal trading is most successful trading method. But have you wondered what makes price move in very aggressive way in short time?
Its the basic idea behind this concept which if you understand your all issues may be resolved
1. Supply and Demand : Why price moves up and down? its just moving for supply and demand, and its not that easy to search on google and understand supply and demand. Its very complex to find real working methods of supply and demands but everything is built up from base, and that base information is available all over the internet.
2. Gaps : Not that ICT FVG gaps, dont ever try that to trade with real money as all is trash as per my backtest. The real gaps are basic gaps between candles which includes hidden information which a trader may decode. A gap is simple gap between candle bodies. A gap is not required to be between first and third candle, it can be between first and second too. Gaps can be between wick or bodies, both can be a subject to study.
3. Pattern : I completely avoid this, as my trading system in MT5 is 100% mechanical. but i started as a pattern trader. I traded wedge, triangle, parallel channel for a limited time and i was successful but these things are error prone, there is high chances of human errors possible and there is no fix sl tp method, and the win ratio is less. But i am not saying that is trash, but i have just left trading the patterns but they are still powerful if one can decode them. In this screenshot you can see how the triangle breakout is following up 1:1 rectangle geometrical ratio. They are really awesome but I believe its not possible to code a perfect system which can trade these pattern with pinpoint accuracy.
4. Harmonics : As soon as price projects to D, price may shoot up, but again this is not something i trade. I had a keen interest and I studied harmonics but this is just a good looking logical approach but not a choice to code and trade for me.
5. Liquidity : Another reason of aggressive move can be liquidity hunt. Its just a simple concept where time is given highest priority. Lets understand your friend told you he is going to drive your car for 5km, but after 6 hours he calls you that he drove 100km, now this will let you think he will come back later so you should stop waiting, but in reality he lied and came back to your house within 5 minutes and you are shocked. Same way, the market lure traders believing that price has moved too far away from support and resistance that makes you believe that price wont come back to original point but in reality it comes and takes all stops then continue moving in your profit direction
The only way to protect from these are better position management. If you are a retail trader, it will be 99% impossible for you to manage your position in professional way
List of professional way are hedging as a top method and second is martingale but its not possible for retail trader to sustain with these. Only hedge funds are capable of that.
As a retail trader your only option is to
1.keep a stop loss
2. find strategies with minimum 1:2 or more risk : reward.
3.Trail your SL and TP
Regards
@Arpit_X
